E3: What your first customers will look like

TRANSCRIPT

Alex Levin: [00:00:00] Hi, I'm Alex Levin, the co founder and CEO of Regal and I'm here with my co founder, Rebecca Green. And so today we're going to dive into what your first few customers will look like. I actually still remember when Rebecca and I were starting to get our first customers for Regal, and I don't know if Rebecca will admit this now, but I think we couldn't believe that people would pay us at the very beginning.

And it was, you know, amazing when all of a sudden, you know, money showed up in our bank account and we went, this is great. You know, this is a fantastic way to start. So I mean, to start Rebecca, you want to think back to like the very beginning you know, getting our first few customers here or sort of another company.

And what that was like,

Rebecca Greene: sure. I mean, one of the things that I remember thinking about when we were trying to get our first customers was who's the right kind of customer to get. Who's going to give us honest feedback about what we were building and the pain point we were solving. And, you know, we didn't have a B2B background really.

So we didn't even like really think [00:01:00] ICP yet, or that kind of terminology was way too early for that. But I think the most important thing is we were trying to stay away from friends. Like that was the number one thing, like we knew our friends would say nice things and kind of tell us what we wanted to hear.

So I do remember like one of our criteria was, okay, it has to be at least one degree removed. If we're going to reach out to them on email, it can be an intro from somebody who thinks they're in, you know, our target, but it cannot be someone who has any like relationship directly with us, who's just going to tell us what we hear.

Alex Levin: Yeah. So like, let's dig into that more. So. When you're having those conversations, like what kind of feedback are you looking for, or, you know, what are you looking to get that maybe to your point, like our friends, you know, we're never going to give us.

Rebecca Greene: Yeah, I think our very first emails that we reached out, it said literally nothing about the product we were building.

We had literally no product. So that was easy. But it, it more so tried to test the pitch and a little bit the pain point we were going after. I think if I recall, our first emails were basically [00:02:00] like, hey, we're building something or we've built something, you know, that can make, you bring your next, you know, top growth channel, something like that.

And we were validating the pain point of were marketers and B2C businesses or salespeople in B2C businesses struggling to find their next big growth channel and trying to see if that was even something that would resonate with them. That was the first thing that we did is like validate the pitch.

I think the second thing we were trying to figure out is. You know, could we get them on the phone, right? Like, could we even like get them past the first process of like, they'll, they'll email us back and they'll say, yes, this is a painful enough problem. I'll get on the phone with you and talk to you about it, even though we didn't know them.

And then from there, it was like each iteration of the conversation was like, can we get them 1 step deeper into the funnel as much as possible?

Alex Levin: Yeah. I mean, I remember in those days. I was like very interested in, you know, what do these customers look like that were willing to talk with us? Like, you know, how in our [00:03:00] specific industry where we were selling contact center software, you know, what was their current contact center software?

You know, how many agents they have, how many calls were they making? What metrics did they like care about, you know, what were they trying to change for next year? So, you know, what were they already like confidence gonna happen and what were like the things where they were like, I don't know I'm gonna be able to hit this goal and you know to your point, you know, whether they were like Whether they were interested in the pain point we were talking about or whether there were other pain points and like, you know We were talking about this pain point and they kept saying no no, like come over here is my real like thing You know, in any one conversation, it's not enough to know, like, you know, if it's going to be the right one to focus on.

But, you know, I think we had probably 100, 200 of these conversations. With very early customers before we, or potential customers before we had a product and it helped a lot to make sure we understood what their pain was, you know, what their likeliness to actually take an action to fix that was before anything else.

And I think like, honestly, friends would not have [00:04:00] done it. Like, you know, I'm going to pick on YC here called the YC effect. Like. If you're in YC and you just go to every other company in YC and say, Hey, we'll use my product. Well, guess what? They're going to say yes, because they want to be nice to you.

And you, you end up running into like a problem if you do that, which is that you may get the wrong signal. You may think that the thing you're building is saying people want go and build more product, go and, you know, build a whole go to market motion only to find out that it's just your friend saying yes.

So, you know, be very careful about either that friend effect or the YC effect. I think. It's something, you know, we've learned from other folks so that you're not, you know, chasing the wrong type of customers. And there are, there is such a thing as a bad customer just because they want to pay you doesn't mean that they're a good customer.

So, you know, you need to make sure you decide if they're the right customer for you. I mean, the other thing I remember very early was, you know, you and I had a pretty good idea of the problem space and kind of general idea of what we want the solution to be, but we, we didn't want to wait. You know[00:05:00] till the product was finished, you know, to be able to then go get feedback from customers.

So like one of the things we did very early was we made mock ups of what we thought the product would be. So if we identified a customer that had the right pain points and, you know, was interested in what we were doing, we didn't say, okay, we'll come back in a year, you know, or we didn't say, oh, you know, you could be our design partner.

Our motion was great. Here's what we think we're going to build. Like, you know, let's pretend that you're buying this tomorrow. Like, cool. You're ready to sign on the line. And you'd learn a couple of things by forcing that one, you know, whoa, there's four other issues. It could be different people you need to talk to in the OR, different pain points that really were more important.

Other integrations you need to have. So you all of a sudden by forcing them to sign on the dotted line to a number. You know, the real issues came up and to like a lot of people gave us great feedback on, you know, what features we should build first or how we should build the feature. So instead of having to build a first version, then put it in their hands and then build it a second time, we could build the first version in the way that our customers actually want it.

So I think it saves us a lot of [00:06:00] time. So, you know, when I see early stage entrepreneurs that tell me they want to spend a year getting an MVP ready. I, I cringe, like I'd much rather they immediately get a deck in front of, you know, some kind of the right end customer and get that feedback and the build based on the feedback, not build and then get feedback.

Rebecca Greene: I, I push further. I think what you described is maybe how we spoke to the first 2 or 3 or 5 customers or prospects. I think once we started to build a bit more conviction about what people wanted, I think. You know, and this is a good, again, a reason not to go to your friends because they know how early you are, like, part of it is like, not letting it be clear to people how early you are and just saying there is a product you can gate their demo of the product as much as you want behind decks and get them further and further into the funnel.

But by making it clear, this is the product, this is what it does, here are the pain points it solves, you get them to give feedback on what they believe exists already and you get their reactions to it and it's so much [00:07:00] cheaper to iterate on a slide that says what the feature set is than to go build anything.

And so I actually think we were much stronger at Pitching and selling and positioning long before we had an actual product to demo

Alex Levin: for people. Yeah. And the other thing I think you and I realized in, in our case, and in a lot of software, this is true is, you know, you have to make this decision for yourself, but for some of the products we wanted to build.

So we could do man behind the curtain for those products for a while and give our customer the same value. So we never wanted to be in a situation where the customer didn't get the value that they were signing up for. So what they were signing up for was the ability to have event triggered calls and texts.

We had to be able to give them that, but they didn't necessarily need a front end that was self serve that they could interact with. You know, we could, on the back end, create the journeys that they needed and give them the same value without that self serve aspect. Or even maybe a little less value would still give them the value of the better outcome by having that customized outreach.[00:08:00]

And so once we realized that, we knew that we could sell that product even without having all of it completely engineered. Our full vision for that product completely engineered, complete. The way I sometimes talk about this is to say, when I meet with early stage founders. And they tell me the eight features that this year, I assume those are the eight features they're going to do in the 10 years of the company.

You know, just if you're successful, if you're successful, you're going to get bogged down in the first step. Now, the only people who get to the 10 features right away are the ones who are not successful. And that's a bad thing. So actually like, you know, if you're getting bogged down in that feature, that's a good thing.

Like that means people want it. People are excited. They're giving you feedback. They want you to iterate and that's not, you know, a negative situation to be in.

Rebecca Greene: Yep. I definitely remember the, for investors, the demo we did or the prototype we put together and how long we thought it would take to build it, and then how long it actually took.

Again, it was because the business was growing, customers were using the first thing we built that was the killer use case, and we just kept [00:09:00] having to go deep for a while on that and making it even better for people.

Alex Levin: Yeah, so like I said, it's not a bad thing in the end, you know, I think about also like some of the mistakes that we made early with customers.

You know, or something was intentional. We understood we wanted to go a little bit wider than like our target, ideal customer profile to learn, you know, where we should be like pushing further than what we were selling today. But like, I look back at it and perhaps we didn't learn fast enough in some cases where, you know, we would go after small customers, for instance, that had very few agents, they didn't have people internally to do sort of rev ops or any kind of operational changes to their software and an outcome, but they didn't want to pay the price for software that would be higher quality.

And we'd come in and sort of, we'd do everything for them and help them out and give them this whole fancy solution and like it would work for a couple of weeks and then they go, well, I don't even know how to do this myself. So we probably should have learned faster that there were certain customer segments, like the very small ones that weren't a fit for us.

And it wasn't worth going after [00:10:00] that, but, you know, again, to the bad customer concept, like I think it's. One of the hardest things as an early stage founder is, you know, when you should have conviction that you're right and keep selling it. And when you should take the feedback from people that it's like not quite working or that like seeing the numbers that it's not quite, you know, working and decide to abandon ship and not do that thing.

We're

Rebecca Greene: saying no, saying no to customers, right? When you know, they will

Alex Levin: present revenue. You have advice to early stage folks like we're like us, like how do they decide when to listen to the feedback and when. You know, they should ignore the feedback, so to speak.

Rebecca Greene: Well, in B2B, it's, it's not quantitative.

That's the hardest transition that I've had coming from the B2C world. So, I think you have to use your intuition, your gut, and love small numbers. If you hear the same thing a couple of times in a row in the same way, or you, you sense that people are just... It's not a top priority for them. You have to be willing to give up your [00:11:00] baby and say, like, oh, I think we're wrong on there.

Like, you can see that the beauty of B2B is you can talk to your customers face to face or over zoom and really see when you have their attention, when they're excited, when they're asking the nth order question, or let me see this and when they're just like, nodding along. And the not along is, is how, you know, like, this doesn't matter to them.

So I think it's like, more of those kind of signals where you have to be willing to, like, lean into it and pivot your, your position a little bit faster. Yeah, it was

Alex Levin: very shocking to us because we had come from B2C where you had millions of users coming to your site and you change the flow and you look at the AB test metrics and based on the numbers make a decision.

If having the AB test meant that a couple of extra customers didn't buy. That was okay, because you had millions of people coming in, whereas a B2B, you didn't have that volume of data and like every customer, especially early days was precious and it was hard to say no to people because you felt like you needed that revenue.

There's another lesson I think I have come to over time and I'm not sure you [00:12:00] agree with this is, you know, I think that when you, when you, when you raise money, the clock starts. And like for sure people start paying attention to what you're doing. So I think both of us agree, like delay fundraising as long as possible until you're sure you're really in the right place.

But from there, I thought, you know, it was important for us to generate revenue immediately. And we kind of went right at it and did it. And there were values to that. But I think I've seen a lot of friends that intentionally kept their revenue at zero for longer. And then when they were ready, started pushing revenue more.

The risk to that is you're not charging people for something. It's hard to get the feedback, but the value was that. They then grew their revenue much faster because they'd gotten much more sophisticated about the product and a lot of other pieces and they had this sort of built in group. So I think like I probably tend to still fall like in saying we were the in doing the right thing for our business and generating revenue quickly.

But I do think like there are there are certain businesses where. As long as you're generating people [00:13:00] using your product, it's okay to delay the modernization a little bit. What I, what I would encourage people to do that I think not enough do though is make sure it's contracted. So if you're going to say, cool, the price for this product is 100 a seat.

Great. Get them to sign something that says they get six months at zero and then it's a hundred dollars a seat. Don't just put them in something saying, cool, it's free forever. And we'll negotiate later. Because then you don't really ever get the feedback we're doing. But I think like the probably was opportunity to do that at the beginning.

And it would have. Allowed us a little bit more flexibility to experiment and, you know, learn more more quickly.

Rebecca Greene: Yeah, I come out on the same side as you and I'm not sure coming into the business. I would have but I think. Revenue creates a necessary pressure to focus a company on the things that matter and the features that matter to customers that they have.

Actual willingness to pay for and I think delaying the signal on [00:14:00] willingness to pay is very dangerous. And I think there's a subset of businesses where that's mission where that's critical to the type of business. I think about, like, maybe developer tooling where or things that have network effects, right?

Where you're building a community of users and then you want to go and flip it and say, hey, Okay. You know, head of engineering or corporate X. I've now got X. Many of your engineers. This is critical to their workflow. Like, you should pay for it. Now. I think there's a rare set of businesses and motions that that actually works for.

I don't think we're in the business model where that actually would have worked for, because it's not the individual agents who get to choose their software. It's the buyer for us as the business manager or the owner and I think revenue. That's the right amount of pressure on a product and a business.

Alex Levin: So we have a few minutes left. So let's talk about sort of the transition out of the 1st 10 or 20 customers. Like, you know, at what point do you go and hire a sales team? What, like, what is the transition from [00:15:00] founder? Let everything. To going and starting to like create new processes or buy new technology to change the way you're doing it.

I

Rebecca Greene: mean, there are some moments where that's like appropriate. I mean, one is when you think you've got product market fit, right. When you figured out not everything, certainly, but that you figured out a segment of customers who deeply need your. Solution and you have a solution that they have willingness to pay for and you've validated that that is a big enough town or market to go after.

Like, that's 1 thing. The 2nd signal is, like, do you have the money to go pay for a VP of sales or a head of sales and a sales team? And that's about maybe fundraising. And like, have you raised your series a where now the expectation is go to market fit? And can you scale a repeatable sales playbook?

I Think the 3rd 1 and I candidly don't know that we had invested in this enough. When we flipped the switch on this, but is, you know, have you gotten. All the lessons learned from [00:16:00] early founder selling out of the heads of the founders, have you found some way to codify that or to communicate that and articulate it and enable a sales team?

Or have you done 6 months of working with the sales leader in an icy way of co selling? Before you go hire the full sales team. But I think those are like the three kind of prerequisites

Alex Levin: I would think about. And I think, you know, to sort of summarize some of that, I'd say it's much later than people think that they should go and do this.

Like, it's not cool. I have a product, you know, one person agreed to talk to me. I'm going to go hire a sales team. Like in our opinion, it's. The founder selling through, you know, we sold through 3 million in run rate, like, you know, maybe, you know, maybe you get away with selling only through 1 million, but certainly for a while before you go and bring somebody else in, because you need to meet the criteria that you're talking about.

And, you know, I think if you do it earlier than that, you have a problem. The one caveat I sometimes give is I wish. I'd hired, you know, like a sales person to support me, not to be the tip of the spear, so to speak, but to make sure that [00:17:00] on weeks where I was doing other thing, they're helping with outbound, that after meetings, they were helping with follow up, that they were keeping me honest to the process and that they were learning, to your point, what was working and writing it all down.

So we could create a scalable process. I think I went too long doing it completely on my own without having that. And it made it a little bit harder to shift into a process afterward. So that's all we have for today. Thank you very much for listening and, you know, hope you come back and watch more episodes of 15 minute founder.

Thank you.

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