Dan Martell - How To Build a Software Company With No Money

00:00:00.300 Don't write the code.

00:00:09.900 How to test your software idea without writing any code

00:00:13.240 whatsoever.

00:00:14.040 Maybe you've already started hiring a developer.

00:00:17.160 Potentially, you've built the product already in the market.

00:00:19.380 Or maybe you don't even have an idea,

00:00:21.520 but you don't even know where to start.

00:00:23.000 I'm going to share something in this video that's going to make

00:00:26.000 it ridiculously easy.

00:00:26.960 But I know right off the bat, you're thinking,

00:00:29.360 My situation's probably a little different, Dan,

00:00:31.660 and I don't know if following this advice

00:00:34.000 is gonna work for my specific situation,

00:00:36.300 and I'm begging you, I'm pleading with you,

00:00:37.960 please, listen, just try it.

00:00:42.080 It's, I can't tell you the amount of entrepreneurs,

00:00:46.220 hundreds of entrepreneurs that come to me

00:00:48.920 after they've spent months, years,

00:00:51.720 hundreds of thousands of dollars invested

00:00:53.760 in building a product that nobody wanted.

00:00:57.020 What I'm gonna show you is a simple framework

00:00:58.860 that's gonna allow you to build something

00:01:00.420 that the customer absolutely wants.

00:01:01.840 You can't mess it up.

00:01:02.740 If you follow this process, it's guaranteed, right?

00:01:05.260 You're gonna do it in a way that's gonna get the customer

00:01:07.700 to finance the development.

00:01:09.600 It's called customer financing.

00:01:10.980 It's not venture, it's not angel, it's not friends and family.

00:01:13.980 It's actually getting the customers to finance it

00:01:16.100 and it's going to make it easy, okay?

00:01:18.920 So I want to deconstruct a few of my companies first

00:01:21.880 so you have some context.

00:01:22.860 When I was building my company, Flowtown,

00:01:24.660 we were a venture-backed software company

00:01:26.960 But before we ever raised money for that product,

00:01:29.460 we were a social marketing application, was we tested it.

00:01:34.200 We actually built a fake interface, okay?

00:01:37.660 We actually, like, I called it Wizard of Oz

00:01:40.420 and we created three screens.

00:01:42.200 The first screen was upload your email addresses.

00:01:44.560 The second one showed a result of those emails analysis

00:01:47.700 and the social media data that we had on all those emails.

00:01:50.460 And then the third screen prompted for payment.

00:01:52.900 Now here's the crazy part.

00:01:54.600 When you submitted payment details on the third page,

00:01:57.140 we didn't collect a credit card.

00:01:58.940 And we just said to you, oops, our servers are over capacity.

00:02:03.540 Our bad.

00:02:04.540 Please come back in the future.

00:02:06.120 We've collected your email.

00:02:07.280 We'll send you an email.

00:02:08.240 We're ready to go.

00:02:09.340 And what that allowed us to do was test the idea with real

00:02:13.220 product that was fake.

00:02:14.660 We actually didn't build anything.

00:02:16.220 Real customers that threw down credit cards.

00:02:18.020 We just didn't collect the credit card.

00:02:19.760 And we saw the conversion rate from Invite in regards to what

00:02:22.900 thought it would do, what information aggregated view

00:02:26.080 they saw, and did they have enough interest

00:02:28.000 in going forward.

00:02:29.200 So that's one example.

00:02:30.640 My next company, Clarity, was a marketplace

00:02:32.780 for entrepreneurs to get advice over the phone

00:02:35.140 from other entrepreneurs in real time.

00:02:37.780 And what we did, well, what I did to test it

00:02:40.280 in the early days was real simple.

00:02:41.980 I used three technologies.

00:02:43.520 One, I found an expert, somebody that could give

00:02:45.920 SEO advice that people knew of, that was notable,

00:02:49.220 a guy named Neil Patel.

00:02:50.860 Really expensive, so it's actually a funny story.

00:02:53.100 I emailed Neil, I was on Skype chat, and I was like,

00:02:55.860 hey Neil, how much would you charge for SEO advice?

00:02:58.700 Thinking like 500 bucks or something like that.

00:03:01.440 And he's like, $2,000 and truthfully I don't even do it

00:03:03.880 anymore outside of private equity companies because

00:03:06.240 they're usually gonna then put me on retainer.

00:03:07.920 And I'm like, okay, good to know.

00:03:10.780 Now, why was that important?

00:03:12.340 Because before writing any software,

00:03:14.080 I started to understand the pricing dynamics of the experts.

00:03:17.580 If you think that, you know, a certain type of person's

00:03:19.960 going to use your platform and you reach out to them and they

00:03:22.260 all say no for a reason, you learn more about it.

00:03:25.500 So I had to find people that were priced appropriately.

00:03:27.940 So I found some experts that had blogs that were pretty well

00:03:30.880 known and they were willing to do it for $500 an hour.

00:03:33.180 Then I reached out to a bunch of startup founders that I knew

00:03:35.480 had kind of marketplace type dynamics to their product,

00:03:39.640 content marketing and I said, hey, would you pay $500 to talk

00:03:43.680 to this expert and they said absolutely and I was no problem.

00:03:47.220 I coordinated the call using Google Calendar, no tech,

00:03:51.540 and 1-800-FREE-CONFERENCE-CALL.

00:03:53.720 Free conference call, Google Calendar,

00:03:56.020 locked and loaded, tested with money, PayPal.

00:03:59.900 That's what I'm talking about, is being creative about how you

00:04:03.720 kind of test your idea.

00:04:04.780 But I'm going to walk you through a very specific way

00:04:07.540 that I think is even better.

00:04:08.680 So there's three steps to testing your software idea

00:04:11.680 without writing any code.

00:04:12.640 One is building a clickable prototype.

00:04:16.600 Here's the way to think about it is you wouldn't build a

00:04:19.240 skyscraper, you know, a $100 million skyscraper without

00:04:23.340 building kind of a miniature version of that skyscraper to

00:04:26.840 see kind of like how does it sit on the land and how do people

00:04:29.380 interact with it and, you know, kind of the dimensions and

00:04:31.820 whatnot.

00:04:32.680 That's the same thing for software.

00:04:34.080 So what I recommend is using a tool like Keynotopia that you

00:04:38.120 can download and use Keynote or maybe use PowerPoint and create

00:04:41.820 clickable screens.

00:04:42.960 like if you can draw a square box, you're good to go, okay?

00:04:46.840 That simple and you just say okay,

00:04:48.740 well somebody logs in here and then they go to this area

00:04:51.260 and they create this thing and then they have the results

00:04:53.840 and then there's a dashboard and you just create

00:04:56.500 the simulation of how the software will work.

00:04:59.200 If you wanna get fancy and I don't recommend it,

00:05:01.940 there are other products out there like a Balsamiq,

00:05:04.940 like a UX pin, like InVision app that allows you

00:05:08.460 to create almost pixel perfect simulation of your prototype.

00:05:12.080 Now, here's why I don't recommend those is because when you

00:05:14.680 show them to customers for feedback, they might be a little

00:05:17.560 hesitant to give you really honest feedback because they

00:05:20.220 think like, oh, you already built this.

00:05:21.720 I don't want to hurt people's feelings, you know?

00:05:23.720 So I highly recommend that if you want, you can use a clipboard.

00:05:27.200 This is what I used to do early days.

00:05:28.500 When I was in my early 20s, clipboard, piece of paper,

00:05:31.360 big Sharpie marker and I would draw it and I would go to the

00:05:33.760 mall or the farmer's market or wherever your ideal customer

00:05:36.980 hangs out, okay? 0.99

00:05:38.200 And so you just, big squares and it sounds stupid but I'm 0.98

00:05:40.840 I'm telling you that entrepreneurs that are willing 0.99

00:05:42.340 to do that are the ones that are gonna be successful.

00:05:45.620 If you think that that's above you and that's hokey pokey 1.00

00:05:48.840 and you don't wanna do it, trust me.

00:05:50.520 It's gonna be a shock to you when you finally have to go

00:05:53.960 out into the world and actually sell a product

00:05:55.960 that is probably not really where it needs to be.

00:05:58.620 So that's one, is build a clickable prototype of your idea.

00:06:01.060 The second thing is find the early adopters, okay,

00:06:04.560 and the innovators.

00:06:05.460 There's this thing called the technology adoption curve

00:06:07.660 by Jeffrey Moore and it talks about the different

00:06:10.700 phases of technology adoption.

00:06:12.940 And what I've seen most entrepreneurs starting off

00:06:15.480 and failing at their software do is they go for feedback

00:06:19.140 from people that aren't early adopters.

00:06:22.120 People that are what's called the early majority

00:06:23.880 or even worse, the late majority.

00:06:25.380 If you live, here's the deal.

00:06:27.220 You're building a restaurant app and you live in a town

00:06:29.460 of 100,000 people and you think that there are restaurants

00:06:33.820 that are early adopters, you're probably misled.

00:06:37.220 In small towns, there's not people innovating

00:06:40.100 and pushing the limit.

00:06:41.260 I remember a long time ago, a friend of mine came to me,

00:06:43.300 he's like, hey, I've got this idea.

00:06:44.800 There's this new thing called iPads,

00:06:46.240 and I wanna build an app that lets people order their food

00:06:48.800 from the table, from the iPad.

00:06:51.220 And I was like, cool, well, go talk to potential customers.

00:06:55.120 And the challenge is they went and talked to people

00:06:56.920 in their own town that were not early adopters,

00:06:59.460 restaurateurs, and all of them said,

00:07:01.320 customers will never do this, it's about experience,

00:07:03.720 never work, never work, never work, so they stopped.

00:07:07.600 The challenge was is that they didn't think about,

00:07:09.600 okay, what are some of the characteristics

00:07:12.500 of an early adopter customer?

00:07:14.040 Where do they spend time?

00:07:15.300 What do they look like?

00:07:16.200 Maybe they're using Snapchat for marketing.

00:07:18.640 I mean, that would be a clear characteristic.

00:07:20.480 If I found a restaurant that used Snapchat,

00:07:22.580 then I'd be like, okay, they're early adopters.

00:07:24.440 Back in the day, it would've been had a Facebook page, right?

00:07:27.620 Maybe they're using Facebook messaging for marketing.

00:07:30.760 I mean, you're gonna have to figure it out

00:07:32.020 for your context and your time in the world.

00:07:34.160 What is it that gives you inclination

00:07:36.560 that that type of customer is an early adopter,

00:07:39.360 is an innovator, progressive in their thinking,

00:07:42.100 willing to try and adopt new technologies.

00:07:45.060 Once you have that, then you use those people

00:07:48.100 to validate your clickable prototype.

00:07:50.040 And then the third thing you wanna do is pre-sell it.

00:07:53.600 Pre-sell your software so that you're not building

00:07:57.080 for three, four, five, six months,

00:07:59.080 spending tens of thousands of dollars on a product,

00:08:01.380 and then finally showing it to the customer

00:08:03.080 for them to say, that's really cool,

00:08:05.620 but it's really not gonna meet our needs

00:08:07.480 because it's missing this one thing.

00:08:09.680 You know, the unfortunate situation is that most

00:08:13.760 potential customers giving you feedback when there's no

00:08:15.720 financial commitment, they're just being nice.

00:08:18.560 And I can't hold them against it.

00:08:19.920 They don't, you know, if you're an entrepreneur and you're

00:08:21.560 passionate and you're excited about what you're building on,

00:08:23.760 the last thing they want to do is be the person that busts

00:08:26.100 your bubble.

00:08:26.940 They don't want to say it's a bad idea.

00:08:28.140 But I will tell you this, everything changes when they

00:08:31.340 give you a dollar, okay?

00:08:32.680 Once you ask for a dollar, I don't care if it's one, 10,

00:08:35.480 A hundred, a thousand.

00:08:36.880 Soon as you ask for money, everything changes

00:08:39.760 in regards to their thinking around your product

00:08:43.080 and what's required to actually meet their needs.

00:08:44.980 If they're gonna exchange money,

00:08:47.060 then they're gonna start saying,

00:08:48.360 well, does it allow me to invite my team?

00:08:50.320 How do I collaborate?

00:08:51.700 How do I pull a specific report?

00:08:54.400 You know, if you're asking me to use this

00:08:56.800 to run my Facebook ads, what's the report I'm gonna see

00:08:59.240 to know that I'm getting a positive ROI?

00:09:00.980 Whatever it is, as soon as you ask for money,

00:09:03.680 that's when the customer's gonna get clear

00:09:05.680 of what they need and give you very,

00:09:07.680 what's called true customer validation.

00:09:09.840 Most people think they're doing customer validation.

00:09:11.720 They're not.

00:09:12.560 If you don't ask for some kind of commitment,

00:09:14.580 either a major time commitment and or a financial commitment,

00:09:18.280 the feedback is not validated.

00:09:20.380 Now, here's the myth.

00:09:21.780 Most people think, you know, Dan, my situation's different.

00:09:25.280 I can't pre-sell my software.

00:09:26.980 There's no way a big company is gonna give me money

00:09:30.220 for something that's not built.

00:09:32.360 Here's why I know that that's just absolutely not true.

00:09:34.660 I came from, I built a consulting company,

00:09:37.000 Spherick Technologies.

00:09:38.000 I worked with innovation departments inside of Procter

00:09:40.260 and Gamble, Doe Fuge, Johnson and Johnson.

00:09:42.300 And here's what I learned.

00:09:44.100 They were willing to give my company money to build innovation,

00:09:47.800 to build custom solutions, to build software.

00:09:50.320 And had there been a product off the shelf that delivered the

00:09:54.420 solution to the problem they had, they would have bought that

00:09:57.160 versus asking us to build it.

00:10:00.020 So anytime people say, well, my situation's different.

00:10:02.260 I say, no, it's not.

00:10:03.100 If there's a company out there that you can see doing something

00:10:06.600 similar to you, but maybe just for them, for their business,

00:10:09.960 that means that they thought enough about having that problem

00:10:12.600 solved that they were willing to invest and have a company build

00:10:15.940 a custom solution for them, which means they would have paid

00:10:19.140 you upfront for your solution.

00:10:20.680 They would want to help you co-create it,

00:10:22.420 especially if you show the mock-ups, you work with them,

00:10:25.140 you put them part of the customer advisory board,

00:10:27.420 and that is how you validate your idea, you get pre-sales,

00:10:31.960 and you ensure you build the right product.

00:10:35.060 So, real quick, make sure that you create

00:10:37.800 a clickable prototype to get real feedback.

00:10:40.140 Find a customer that's an early adopter.

00:10:42.000 And third, get them to pre-buy your software.

00:10:44.140 I hope this video finds you incredibly well

00:10:46.580 and I'll see you next Monday.

00:10:48.100 If you liked this video, be sure to subscribe

00:10:49.720 to my channel for other videos on how to grow

00:10:52.340 and build your software company.

00:10:54.120 I'd also invite you to join my newsletter

00:10:56.320 where I share free training videos,

00:10:58.180 exclusive contests and other private invites to events

00:11:01.520 And also, if you're ready to get going,

00:11:02.800 I got two other videos queued up for you right now.

00:11:05.160 See you next Monday.

Dan Martell - October 16, 2017

How To Build a Software Company With No Money

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