Lenny's Newsletter - How to validate your B2B startup idea
How to validate your B2B startup ideaPart two of my seven-part series on how to kickstart and scale a B2B business👋 Hey, I’m Lenny and welcome to a 🔒 subscriber-only edition 🔒 of my weekly newsletter. Each week I tackle reader questions about building product, driving growth, and accelerating your career. Welcome to part two of kickstarting and scaling a B2B business. Here’s where we’re at:
Let’s get into it. A huge thank-you to Akshay Kothari (COO of Notion), Ali Ghodsi (CEO of Databricks), Barry McCardel (CEO of Hex), Boris Jabes (CEO of Census), Calvin French-Owen (co-founder of Segment), Cameron Adams (co-founder and CPO of Canva), Christina Cacioppo (CEO of Vanta), David Hsu (CEO of Retool), Eilon Reshef (CEO of Gong), Eric Glyman (CEO of Ramp), Guy Podjarny (CEO of Snyk), Jori Lallo (co-founder of Linear), Julianna Lamb and Reed McGinley-Stempel (co-founders of Stytch), Mathilde Collin (CEO of Front), Rick Song (CEO of Persona), Rujul Zaparde and Lu Cheng (co-founders of Zip), Ryan Glasgow (CEO of Sprig), Shahed Khan (co-founder of Loom), Shishir Mehrotra (CEO of Coda), Sho Kuwamoto (VP of Product of Figma), Spenser Skates (co-founder and CEO of Amplitude), and Tomer London (co-founder and CPO of Gusto) for contributing to this series. Art by Natalie Harney. Forty percent (nearly half!) of the companies I spoke with went through at least one failed idea before discovering something that worked. Some went through 10. As Christina Cacioppo eloquently put it, “Our first couple of ideas were just total crap.” Many shared the same sentiment. Here’s how some of today’s biggest B2B startups began:
The question we’ll be tackling in today’s post is this: Once you have your startup idea, how do you know if it’s a big idea or . . . total crap? Below, I’ll share:
Some of my biggest takeaways and surprises from this phase:
Four strategies for validating your B2B startup ideaAcross two dozen interviews, I noticed four distinct paths to effectively validating a startup idea:
If you look closely, all four paths are just different ways to validate the same things we focused on in part 1—pull and pain—with varying degrees of up-front investment. Here’s what pain and pull look like in practice:
1. The do-it-manually path: Solve the problem manually for a small number of companiesThis path is a great choice for founders who are unclear whether the problem they are going after is important, or even solvable. Though it was the least common path, when done right, it can unlock huge lessons with very low up-front investment. In the case of Vanta, Christina Cacioppo sensed there was a big opportunity in the compliance/security space but wasn’t confident the pain was that bad. So she manually created compliance reports for a few companies and noticed (surprisingly) that they all found them very valuable:
The founders of Ramp did the same thing with savings reports:
2. The listening path: First talk to tons of potential users and then start buildingThis path should be your default, unless you have a clear sense of what you need to build. Go this route with the goal of speaking with around 30 potential customers, looking for pain and pull (see above what that means). The founders of Zip spoke with 75 potential users before committing to their idea:
The founders of Stytch spoke with about 30 people and noticed there was universal hatred (i.e. pain) for the existing solution. Then they started building, and launched quickly, per the advice of their lead investor:
The founders of Gusto had an extremely similar experience, both in terms of finding real hatred for the existing solution and also talking to exactly 30 potential customers:
Guy Podjarny, the co-founder of Snyk, spent time talking to dozens of potential users before building anything, not so much to validate the problem (it was obvious) but to make sure that if he built the solution, companies would embrace it:
The founders of Ramp spoke to more than 100 potential users before jumping in and building anything (even before building their manual solution):
You may think you’ve talked to enough people, but don’t stop until you’re seeing evidence of real pull (e.g. money, usage, strong emotion, cold inbound). Spenser Skates, the founder of Amplitude, stopped at 30 conversations and later realized he should have talked to more:
3. The prototype path: Create a prototype and co-create with a small number of design partners...Subscribe to Lenny's Newsletter to read the rest.Become a paying subscriber of Lenny's Newsletter to get access to this post and other subscriber-only content. A subscription gets you:
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