We built a great product, found product/market fit, hit "hockey stick"-shaped growth. The end.
There has been much gnashing of teeth and wringing of hands around the impending "Series A Cliff." For those of you who don't know what this is (Hi Mom! Thanks for reading!), the premise is that seed funding is much easier to get and in high supply but funding in subsequent rounds is exponentially more scarce. Thus, many companies will be able to get seed funding but will inevitably die out due to lack of capital shortly thereafter.
At my startup Speek, we don’t take this lightly. We decided to "Series A Cliff–Proof" our startup. Here’s how.
First, having a product that not only doesn’t suck, but that people will actually use and/or pay for, is a fairly surefire way to stave off the Series A Cliff blues. Specifically here is what we did:
- We validated the demand for our product at the conceptual stage. We leveraged The Lean Startup methodology to verify that people would do conference calls using a personal link before we started our company or wrote any code towards a product.
- We found product/market fit. We sent the survey.io product/market fit survey to all of our users after their first call. We segmented their responses into cohorts of 30. Once 40% said they would be "very disappointed" if Speek didn’t exist, we started to scale user-acquisition efforts.
- We focused on user experience. This seems obvious but for some reason it gets missed. We spent a ton of time making the basics of our user experience great—new-user onboarding, getting on a call, post-call/between-call actions. We focused on nailing this before the now notorious "growth hacking" started. This included refactoring, and flat out rewriting some code, as well as rolling out a new WebRTC VoIP client to ensure the utmost web and voice quality for our users. One user has one bad experience, and they are gone. We worked our damnedest to make sure this didn't happen.
- We got our data in order. Tracking and reporting on actionable data and metrics is really, really hard. It demands almost full-time attention. It’s very easy to simply dump stuff into your database and run them through a slew of analytics tools like GA, KISS, and Mixpanel and assume you’re all set. Wrong. Creating and maintaining custom events, funnels, conversion rates, and A/B tests takes a significant amount of time and attention, and analyzing and acting on what this data tells you takes even more of both. There's no shortcut here; you have to do the work.
- We talked to our users. We didn’t just "get out of the building" during the early validation stages of our product concept. We continued our customer development throughout, and we continue it today. Users will not volunteer feedback; you must solicit it. You have to put on your bill collector hat and proactively solicit (read: stalk) your users to do customer interviews and otherwise gather feedback.
- We started charging for our product. Again, I know this is not en vogue or sexy but it works. We started far earlier than most startups (and, looking back, still far later than we should have). It’s not "cool" to do this. Most startups chase the ever-elusive K-Factor and/or vanity metrics like unique visitors and registrations. We focused on power users who would actually pay us for our product and nothing else. Ultimately, it doesn't matter how "cool" your product is if nobody is willing to pay for it. By charging our users early, we entered into a covenant with them: pay us for our product, and we will continue to make sure that it's money well spent.
And that's it. We worked very hard, but that alone is not enough. We had what we thought was a great idea (still do), but that's not enough either. By finding out who our users were and what they wanted, by constantly paying attention to our data in a sophisticated way to continually fine-tuning our product and the concurrent user experience, we made sure that we would continue to be a smart bet for investors well after the "gee whiz" phase.
Do this, and you'll find that the Series A Cliff no longer threatens your horizon.
[Image: Flickr user Kenny Louie]