Tag Archives: startup

Sell first, build later… Otherwise known as validate your market

When I talk to start-ups I often talk about the idea of sell first, build later. When I look back at the Learning Pool story, adopting this strategy was a key ingredient of our survival in the very early days and I have no doubt that ability to execute in this way has stood us in good stead as we’ve grown. Before explaining why I think this is good idea for early stage companies, a few health warnings:

  1. You can really only do this as an early stage company. When you get bigger the stakes and the expectations are higher and the risk around doing this becomes intolerable;
  2. Its easier in a business to business sale than in a business to consumer environment although you can do elements of this in a b2c setup;
  3. This is not a strategy really. It’s more a tactic to get into the market and get in front (virtually or physically) of a customer. You shouldn’t forget this bit because it’s maybe the most important element and you have to be ready to grow away from this approach;
  4. You simply must execute the build bit… otherwise your credibility, and with it your business will disappear down the toilet!

All that said, I think there are compelling reasons for adopting this approach, namely;

  1. Its all you can afford when you are a very early stage company with no cash and a window of opportunity that’s closing fast;
  2. it’s a great way to validate your market and best of all, you get to see, and if your lucky even talk to your customers to find out what they like, what they need and what they might want in the future;
  3. You find out whether you really can build this thing and identify the holes in your delivery machine that must be fixed;
  4. You get track record and proof, or otherwise that your concept is viable;
  5. You get to change direction and focus on the things that make the biggest impact for your customers based on real data and honest feedback. You also get to tweak the business model, pricing or pitch if you need to;
  6. It gives you working capital to get the rest of the product built.

One of my best memories of this in the Learning Pool story is when we’d sold a product to a large organisation before it was completely built. We were totally up front with them about it and immediately got to work on building the product so that we delivered on what we promised. A couple of months later we went to see the customer on a sunny day and sat outside their office meeting our contact and celebrate a successful project. She started the meeting by giving us a cheque for more money than the company had ever billed up until that point. When we got back in the car I asked Mary if she remembered anything of the meeting after seeing that cheque… Nope.. me neither! It was a great laugh nonetheless!