SaaS Startups

Planning to Do a SaaS Startup? Don’t Forget the 20 Interview Rule.

echojason@gmail.com'

Jason Lemkin

Screen Shot 2013-10-09 at 9.14.50 AMRecently I spent some time with two seemingly similar SaaS start-ups.  Both are at about $100k in MRR (congratulations!).  Both have happy, enthusiastic customers.  Both have really great products and are organically growing.  Both have great founder CEOs.

But even though both are now at $1m ARR … one is just so much better positioned than the other for success getting to $5m and $10m in ARR quickly.   And at least in this case, in this case study, the difference to me is clear:  the Better Positioned $1m ARR SaaS Start-Up Knew Its Customers From Day 1.  The other one at $1m ARR, figured it out on the fly … and really, is still figuring it out.

What’s the difference you might ask?  They both got to the same place, at the same time, more or less.  Well the difference is architecture.  Not just software, but the whole company.  The start-up that didn’t know who its core customer would be is behind on team, behind on market presence, behind on how to market and sell to its core customers, and behind on visibility at the prospect level.  And the start-up that knew who its target customer was has a more appropriate team for its customers needs, and accelerating visibility at the prospect/market level.

I know everything can’t go according to plan in any start-up.  It certainly didn’t for me.

But let me just make one suggestion if it’s early days:  Don’t Forget the 20 Interview Rule, if you are planning to sell to the enterprise / businesses of any meaningful size.

The 20 Interview Rule is simple:  Before You Write a Line of Code, Interview 20 Real, Potential Customers.  Not your friends.  Not people you know.  They have to be real potential buyers.  I.e., if you hope to sell to sales managers, you can’t interview a rep.  You have to interview a VP or Director of Sales or Sales Operations.

And you have to do 20.  I know it’s hard to get to 20.  But it’s the right number:

  • You need the First 5 Interviews just to truly understand the white space and the current opportunity.  Yes, you probably think you already understand it.  But you are the vendor, not the purchaser.  You need to understand your prospective app from the purchaser’s perspective, for real.
  • You need the Next 5 Interviews to confirm your pattern recognition.  You learn from the first 5, you confirm in the next 5.
  • You need Interviews 11-20 to Nail Your Pitch and Hone Your Thesis.  Once you truly understand the white space from a buyer’s perspective, and you’ve figured out the nuances and challenges … it’s time to nail your pitch for real.  And by doing this, you’ll also hone your thesis and strategy.   That’s what interviews 11-20 are.  To get real critical feedback on what you’ve learned.  To learn about corner cases that may in fact be critical insertion points for you to win.  To dig in on what is really 10x better, not just 2x or 5x better.

And let me tell you, at least from my experience, don’t expect all 20 to be positive.  Many of My 20 Interviews in both my start-ups were very critical.  Or worse, lukewarm.  Lukewarm is even worse, because it says yeah it’s sort of interesting … but no way I’d buy … and implicitly … your idea is a huge waste of time.  I’d rather get the negative feedback 😉

I get the Steve Jobs thing.  You just have to build it.  You do.  But this is SaaS.  You’re solving a business’ problem.  They don’t know how to solve it, or what you should build.  But they do now how to express their problem.  Acutely, and thoughtfully.

So even if the specific feedback on your product and idea is off-point — the learnings on the true pain point you’re solving will be perfectly on-point.

So if you haven’t started yet, as fun as it is to just build the wireframes and get a codin’ … do the 20 Interviews.  For real.  Don’t skimp here.  And listen.  And if nothing else, force yourself to make key changes to your assumptions based on those learnings.  It will pay off.

Published on October 9, 2014
  • Jason great post. I did 78 in Q4 of last year!

    • Awesome. Yeah it’s what the Second Time SaaS CEOs are doing (even better). We’ll put that in the BetterWorks Second-Time CEO post. BetterWorks is just killing it.

      Tell me if I am wrong, but I am 95% sure without those 78 interviews, it would be a very different product struggling to get its first handful of customers. Instead of what it is today — going from $0 to seven figures in single digit months.

  • So how were these guys able to raise any $$ (assuming they are venture funded) WITHOUT having done these types of interviews first?

    • In this case, neither had true VC funding, just angel funding. But if you have a track record (e.g., someone like me), can easily raise VC funding without doing your homework here.

  • Pingback: Secrets of When and How to Talk to Customers at a Startup « SmoothSpan Blog()

  • Nice article Bob. Here’s another good one:

    https://medium.com/@michalbohanes/seven-lessons-i-learned-from-the-failure-of-my-first-startup-dinnr-c166d1cfb8b8

    and would highly recommend any young entrepreneur check out this book: The Mom Test:
    How to talk to customers & learn if your business is a good idea when everyone is lying to you (www.momtestbook.com)

  • So critical here great post Jason. I got our best feature ideas and positioning insight this way to get things started. It’s also key to keep it up over time. I interview every new customer when they come on board to ask why they bought, how they found us, what will make us successful there, and what else they looked at/why choose LevelEleven. That keeps shaping the pitch and the product, and the best part – customers typically thank ME for taking the time to talk to them.

  • Although it’s essential before you build the product, if you miss that step you should still do it. We have 22 academic clients right now, all using the product with great feedback. We are now conducting interviews with all of them to better understand their deeper pain and dig into what their process is really like (literally do the interview while we sit and watch them do their job.

  • Pingback: Startup Reading List #KW41 | gründungslog()

  • Pingback: Friday Reload #26()

  • Pingback: Ambition | The 3 Questions in Enterprise SaaS Sales()

  • Pingback: Selling Your Product Globally: Lessons Learned From International Expension | Gadi Shamia()

  • Pingback: User Research Roundup: November 2014 - Border Crossing Media()

  • Jason – Love this one. In my experience, if you are building any B2B biz you MUST speak to prospects before building anything — it’s deadly not to. To your point you are solving business problems and you have to see enough of the pain point to build a meaningful biz. I have not followed this as a rule in the past, for a variety of reasons, mostly because I was too impatient, in-experienced, and hungry to JUST build something — and it burned me every time.

    At MoPub, we understood the pain point quite well in that the founders had worked at AdMob or Google before launching the business and were app developers themselves. And even with all that experience the space and economics change so quickly that we had to keep the conversation with clients going perpetually. Even now after selling to Twitter, we still have regular CAB meetings (client advisory board meetings).

    When deciding to build Dashtab the founders and advisors were ultra strategic about what we were to be building and why. I had personally been trying to optimized the inside sales rep’s workflow for years — even tried to launch a company through Angelpad a few years back and had been processing the space years before that. Despite all the thought and personal experience I had with the pain point, we still interviewed more than (I forgot exact lol) 50 sales managers, reps, and sales operations stakeholders to make sure they also felt the pain and saw the opportunity. Then we followed up with screenshots only. Collected feedback and ONLY then built an MVP for a private beta. That process took many months and sometimes very humbling — but glad that we did it; and btw, we are still iterating based on mixture between prospect and client feedback and our own product flavoring.

    Love this blog! It’s my favorite!

    Jorge

  • Pingback: If You’re Going to Do a SaaS Start-Up … You Have to Give it 24 Months | SaaStr()

  • MJ

    Selling to enterprise, one should already have domain experience and know what the problems are. This is when you can take the Steve Jobs approach and build what you know will solve problems and can sell. Taking a 100% lean startu approach is only for when you are assuming 100% and don’t have any experience, just an idea they’re passionate about.

    I think many founders, accelerators, VCs, have misunderstood this Lean-concept. When creating products for existing markets, the Lean rules totally change or are not at all applicable.

    If you only build what a few customers tell you they want from short interviews, you’ll possibly have access to them as customers past BETA, but unless you’re bringing value and not an MVP, why en-masse would any sales manager or VP of Sales chose your solution over the market leader?

  • Chris Lema gave similar advice to me on a call last month, and he’s helped get 70+ SaaS on their feet. He recommended using LinkedIn, and I think Clarity.fm is a great resource for this as well. His advice was something like, “Just send them a message saying, ‘I have a new product I want pros like you to try, what’s your hourly rate?'”

    If you can’t take someone rejecting or criticizing your idea, you have no place starting a SaaS, let alone any company. SaaS is a no-ego zone–it’s not about you or your idea, it’s about how much better you can make your users’ lives by making your product.

  • Freddie Cabrera

    How do you manage to get 20 customers to interview when your a B2B SaaS? We are currently on the 20 interview stage of our startup, 3 interviews in with positive feedback. I am having trouble getting more prospects to interview, my customers are Oil & Gas companies. We are building a safety intelligence software that will be able to predict future incidents. What is the most effective way to get to 20?

    Thanks,
    Freddie

    • Jason Lemkin

      Hustle … even an unqualified LinkedIn to a target customer can work if your pitch is compelling enough.

  • Great post, I have just got to over 10 prospect interviews and won a pilot commitment & 3 intents. Most of the early feedback was similar & helped us really learn who will be out best customers. We are focusing on SaaS vendors but by pitching actual prospects we realized where we are not a fit immediately and save precious sales/marketing efforts. Everyone getting into selling to the Enterprise must pitch to 15-20 companies…!!

  • Jordan Thaeler

    OR: find a channel partner who has spent 30+ years selling into this space and knows it cold. VC’s won’t fund you until there’s no risk in the business ($1M ARR -> $10M ARR < 12 months organically) so just do it all yourself.

  • It’s amazing how many people refuse to do the upfront work. Talking to real people gives you such a different intuition about what kind of things to build and directions to take. Great post. Thanks.

Share This