Dan Martell - The Easiest Way to Launch a New Product

00:00:00.000 find those situations find those early adopters most people fail because they get

00:00:06.560 feedback on their product from non-early adopters

00:00:22.880 chelsea how's it going good how are you doing today dan i'm doing incredible um first off i'd

00:00:28.720 love to hear a few things one what is it you do and more importantly how did you get started in

00:00:35.600 that so i am a co-founder with q rounds which is a healthcare technology startup we provide

00:00:43.360 a virtual queue for patients and their families to know when the doctor will be by their room for

00:00:48.480 rounds cool how did you get into that uh you know i was actually a freelance marketing consultant

00:00:56.000 and i was working with a startup team and they asked me to join the team uh there was just the

00:01:02.000 two of them now it's just the three of us we have a good um kind of three-headed monster of skills

00:01:08.160 that expands across everything that we need and we've just been rocking and rolling for the last

00:01:12.160 two years so two years ago you joined the team with the other two founders um and like where

00:01:17.920 are you guys at in the business we're still pre-revenue so they are professors with the

00:01:22.480 local university uh the q round started as a university research project so we're just starting

00:01:28.640 to make the transition out of kind of the university research realm and into a standalone business

00:01:34.880 cool got it so pre-revenue is there customers using the product where is it at kind of

00:01:40.560 we've done some beta pilots and now we're working on finishing up our

00:01:44.080 we kind of had a fugly sort of working type piece of technology that we were piloting with one or

00:01:54.400 two providers in a healthcare institution that's connected to the university and now we've done

00:01:59.360 some user testing we've beautified it we've redone the ux completely and now we're building that out

00:02:05.520 in preparing to pre-sell it to the institutions that we did pilots with and other institutions

00:02:11.680 that we've had some inbound interest from sweet sounds fun um how can i help well we have been

00:02:18.640 starting to raise money and we know eventually we're gonna have to be hiring an outside ceo

00:02:24.880 but one of our investors said that they would love to invest in us if we hire a ceo now and my

00:02:30.560 question is is it is it really smart to be hiring a ceo with that investment money if we don't have

00:02:36.880 revenue yet to support the salary ongoing or if it's not really a step we were looking to make

00:02:42.720 now but knowing that this investor would make a great partner and it would be great to have them

00:02:47.280 on the cap table cap table moving forward well i find just on the surface um the fact that the

00:02:56.800 investor is kind of dictating activity in the business is concerning so most investors in early

00:03:04.560 stage companies like yourselves um don't try to influence too much the early team structure

00:03:13.600 product roadmap go to market like they essentially believe in what you guys are doing and invest in

00:03:18.880 that if they believe that then my first i would just be concerned as a founder that maybe they

00:03:26.080 think if they bring in a ceo that you know they're they're trying to see if you do that so

00:03:31.360 So, I don't know, I'm always like worst case scenario.

00:03:34.780 Well, the worst case scenario is they bring in a new CEO,

00:03:37.740 the founders are there, the CEO is friends with the investor

00:03:41.320 and then over time, they eventually kind of take control

00:03:44.680 of the business and push the founders out.

00:03:46.580 Okay, so that can happen.

00:03:48.560 Oh, I always look at the downside and upside in decisions.

00:03:52.840 So that would be one of them.

00:03:54.180 And I don't think hiring a CEO is the right decision

00:03:59.080 for pre-revenue business.

00:04:00.420 I think you guys, the team should be able to go sell

00:04:04.340 and get customers and get to revenue

00:04:06.380 and prove out the product in the market

00:04:08.540 and make sure there's a fit there

00:04:09.800 and build a demand gen process.

00:04:12.080 And, you know, CEOs, man,

00:04:14.580 especially one that's like for hire, you know,

00:04:17.240 they're used to coming into a business

00:04:18.640 with 25, 30, 50 employees.

00:04:20.740 Like coming into a team of three,

00:04:23.540 you're paying six figure salaries

00:04:25.720 for somebody that's not very valuable in the early days.

00:04:29.440 right? Like, I would just look to you and ask you, like, do you feel good about bringing on a CEO?

00:04:35.520 It sounds like you don't, because that's why you're asking as a question, you know, what do

00:04:39.020 your co-founders think? You know, we're a little on the fence because we're looking to this

00:04:45.200 investment group as kind of the experts. They've done this before. They've invested with other

00:04:49.480 startups before. We're all pretty green at this, thinking that they may know something that we

00:04:54.140 don't but it did feel premature and we haven't taken any uh effort on it or made any uh made any

00:05:02.540 moves on it because we just you have any other investment firms willing to invest yeah yeah so

00:05:09.180 we've been continuing to nurture those other relationships yeah like to me you know my job

00:05:13.580 is to create optionality you know in capital so like it doesn't matter if it's friends and family

00:05:20.300 professional investors high net worth individuals investment groups vcs like my job is to find the

00:05:27.520 best capital for the business and if certain capital comes with constraints terms limitations

00:05:33.140 etc as long as i have optionality then i'm going to make the decision best for the business so yeah

00:05:38.600 on the surface uh without knowing specifically why they're asking for that i you know invested

00:05:45.080 in 40 plus more now I can't remember the number but you know almost 50 companies and I've never

00:05:51.040 made it contingent on and I've co-invested with some of the best investors in the world

00:05:56.320 and I've never seen that part of the conversation so it's not normal I'm not saying this doesn't

00:06:02.100 happen I can see it happening and I don't think I've ever heard it amongst companies I'm involved

00:06:06.480 with but you know not for early stage you know like it's just not normal it's normal for like

00:06:11.620 Series B and Series C potentially, but not for, you know, a three-person team.

00:06:20.080 What do you like best about that? Chelsea, I'm just curious, what resonates most for you?

00:06:25.860 I think feeling like my instincts feel in line with what you're saying is reassuring.

00:06:34.580 There is just all of this unknown, unknown out there, bringing this, especially out of a university

00:06:40.540 and research kind of role into a business it's not just a traditional startup entrepreneur kind

00:06:46.700 of run and gun situation um so just i think really having that reassurance that our instincts were

00:06:52.380 probably right on that again i don't have the full context but like i would just ask them how many

00:06:58.860 times they've done that and go talk to those companies and see if it worked out right like

00:07:03.500 as much as they're doing due diligence on you you should do due diligence on them

00:07:08.060 and like i do this anytime i've raised money i always find out who they've invested in and it

00:07:13.260 didn't work out i don't want to talk to the person where they made the investors a billion dollars

00:07:16.620 that's not interesting i want to talk to the person where seven years later they had to shut

00:07:20.060 the company down and how did the investor act at that point right that's going to tell me a lot

00:07:25.420 about their character that's a great point awesome cool okay my next one is where do you how do you

00:07:32.300 really define what goes into the mvp and where to draw the line for a feature that everyone

00:07:38.460 kind of is in love with but can go in later you know there was a great graphic that i saw

00:07:45.100 and i used to have it like pinned on my twitter account for a long time which was like

00:07:50.380 what it what the definition of an mvp and it was using a car analogy and it's saying it's not the

00:07:57.820 tire then the chassis then the body and eventually you have a car right and that's what a lot of

00:08:04.860 founders do the mvp is you start with the scooter then you do a bike then you do a motorbike then

00:08:11.740 you do a dune buggy right like the mvp is designed to accomplish an outcome in its most simplistic

00:08:22.300 primitive form right so whatever the outcome you're selling the promise you're making in the

00:08:27.260 market right if it's to you know i don't know what what's the what's the promise you're you're

00:08:33.260 making for your guys's product time time time transparency for patients and their families of

00:08:38.540 when the doctor is going to be by for rounds and that's it so if the features help a patient

00:08:45.580 know where they stand in a queue with doctors that is it so what is the three features that

00:08:52.220 this thing has to do that to deliver on that promise it may not be beautiful on the back end

00:08:58.220 a lot of times i always focus on the front end to the consumer not so much to the administrative side

00:09:02.700 of things but at least it does the job right and anything that would be like advanced scheduling

00:09:09.340 or reporting features or even like account creation or account management features i leave

00:09:16.220 that out it's like you can create an account can you change your password not day one right like

00:09:23.020 we'll manually change it give us a call here's a number just call me i'll go log in the back end

00:09:27.180 i'll change it for you like that's the level of of what's considered an mvp right you could spend

00:09:33.980 with that with that idea you could spend three years building the product that like is polished

00:09:38.940 even with three features but you gotta you gotta you know reed hastings from linkedin said it if

00:09:43.980 you don't want your product embarrassed and you waited too long right right okay what do you what

00:09:51.260 resonates with you on that front like you know versus what you thought or what did you like the

00:09:56.540 most um i think the simplicity of the scooter analogy really helps i've never built a car but

00:10:04.540 i've had a scooter and then a motorcycle the problem you're solving is how to get from point

00:10:10.300 a to point b yeah right you gotta most people they fall in love with the technology especially

00:10:18.220 professors okay trust me i've invested in probably four or five research projects that

00:10:24.380 we're trying to productize and the team was so in love with their technology that they didn't even

00:10:31.180 it was like they dismissed certain market opportunities because it wouldn't allow them

00:10:35.020 to do future product tweaks that was like part of why they wanted the company exist so it's like

00:10:41.180 do you want the company exists to be successful and solve a problem or do you want to use this

00:10:45.340 to create a sandbox for you to do research right and the you know i always say if it's cool but

00:10:52.700 it doesn't make you money keep it as a hobby but businesses have to make money at some point have

00:10:58.300 to be profitable have to be able to pay people's salaries have to be able to grab market share and

00:11:05.020 I'm always weary when, you know, people overbuild stuff, not because it's the right thing for the

00:11:12.040 customer, but it's the right thing for them, right? So that's why I like the scooter analogy,

00:11:16.300 because if the problem is trying to get something from point A to point B, I can get you there

00:11:19.460 without building a car. You know, it may not be appealing to everybody, but for this small

00:11:23.800 percentage of early adopters, giddy up, let's go, right? Even the electric skateboard, right? Like

00:11:29.540 super niche, super early adopter type product. But guess what? It was a big enough market for

00:11:35.340 a company to make 25 million a year to build the infrastructure to eventually build something more

00:11:40.540 capable like maybe an electric bike. Right. What about features that maybe are outside of those

00:11:50.540 core three, but make it so your users can actually use it or want to use it? I think that's where

00:11:56.840 it's that fourth feature that we're kind of struggling with to where it technically the

00:12:01.240 beta it accomplished it but it was cumbersome to use and we were having trouble with getting

00:12:07.000 additional pilots for the usability and adoptability part of it i mean anytime i like

00:12:14.680 i get that the the product can't be horrible but the way i look at it is my responsibility

00:12:22.040 as the CEO is to find a foothold in the market, a wedge that based on what we built, they're

00:12:32.260 willing to use it. So, I mean, I guess when you started off, you define the MVP. If the MVP you

00:12:37.700 define didn't actually solve a problem for a market, then you didn't do the MVP right, right?

00:12:42.860 Like if you only did a one wheeled scooter and it didn't work, put the second wheel on or it's

00:12:48.040 actually not useful, right? Like if it's like one wheel and it's dragging the back of it and it's

00:12:52.520 like, yeah, I can move forward, but I'm like, not getting any worse. So, but that's different than

00:12:58.180 saying, well, nobody wants a scooter. It's not that, it's not true. Certain people will, certain

00:13:03.860 situations, it makes a lot of sense. Find those situations, find those early adopters. Most people

00:13:09.980 fail because they get feedback on their product from non-early adopters, right? So when you look

00:13:16.960 at, you know, I think it's Jeffrey Moore wrote a great book called the innovators, um, dilemma

00:13:21.740 and crossing the chasm. He's very clear when he specifies, like, this is what an innovator is.

00:13:28.100 And this is what an early adopter is. And this is the chasm and the early majority and the late

00:13:32.500 majority and the laggards. Like if you get feedback from anybody in those last three boxes,

00:13:37.500 which is the majority of the market, 80%, then you could inadvertently make decisions based on

00:13:44.140 tainted feedback right if i'm if i'm building innovation for example for the restaurant industry

00:13:49.500 and i live in a town of 100 000 people and i go to my local restaurants and i say hey i built this

00:13:54.700 new thing this tablet whatever you can call it a point system a loyalty program an ordering program

00:14:01.500 a food cost analysis whatever it is it's advanced and i'm asking people in a small town that are not

00:14:10.540 category kings early adopters innovators in the restaurant space to give me feedback on my 0.97

00:14:17.020 innovation then it's totally stupid like it won't work right like it won't make sense for me to 0.96

00:14:26.060 have this business that's been around for 23 years it's served the exact same menu and the 0.99

00:14:30.700 only reason they're successful is because they've got this aging population that allows them to go 0.99

00:14:35.980 sideways every year some years are down some years but there's nothing about their business

00:14:39.980 it's interesting right nothing wrong with that it's just they're a small business versus me

00:14:45.100 saying okay i want the list of the top 100 most innovative restaurants in new york city

00:14:51.580 okay and those people i'm going to talk to and i'm going to get feedback on because if they're

00:14:56.380 innovators on the food side on the the menu side on the layout of their store like whatever defines

00:15:02.940 their innovative company then getting feedback about my restaurant innovation that makes sense

00:15:08.620 because they're innovators or early majority or early adopters right and that that is probably

00:15:16.380 like that's a big killer of companies is because i have a relationship and i go seek advice i give

00:15:24.300 it too much weight and it's actually flawed in just the approach that i use to to get the advice

00:15:30.620 does that make sense yeah yeah i think more critically about who you're asking for advice and

00:15:35.900 about the advice that's maybe offered as well you i i really think that if you just go to the

00:15:42.860 mall with a clipboard and ask every person going by you're you're wasting your time because now you

00:15:49.500 can do that if you qualify them right so they walk by and for example let's say i want advice about

00:15:56.380 my property management app from a consumer point of view from people that that rent apartments

00:16:03.740 if one of my questions right off the bat is do you rent or do you own and i don't ask that but

00:16:08.540 i just say hey i built this app what do you think and i'm using that feedback and they're like oh

00:16:11.740 that's interesting i don't think i'd ever do that well do you rent or do you oh well we own a house

00:16:17.020 i've owned a house for 15 years so you don't even rent you don't even understand this market

00:16:20.940 but a lot but startups do this all the time like i see it all the time they never qualify the people

00:16:27.340 they're asking feedback from and when you're making decisions that could impact the developer

00:16:33.020 to go down a path for 20 hours 40 hours 60 hours two engineers to build a feature that might take

00:16:37.820 them three weeks right we're talking what is that 120 240 hours at the developer rates that we pay

00:16:44.700 people like those are some really big financial decisions made with tainted uh feedback and

00:16:50.700 that's that i think is the art component of building a company like do you have do you

00:16:57.260 have that sensibility do you understand how to qualify people out of like what feedback's helpful

00:17:01.580 versus hurtful right yeah that's a perfect segue to my next question is talking about hiring

00:17:09.660 developers and right now we've been well we've got a technical co-founder who with a grad student has

00:17:15.100 built everything thus far and we're working with an agency on the ux side to help us with the

00:17:20.700 testing and the front-end development part at what point does it make the most sense to bring

00:17:26.140 on develop the front-end development in-house versus sticking with an agency relationship

00:17:33.020 yeah you know the challenge with companies and one of the reasons a lot of accelerators like

00:17:38.700 co-founders one technical at least or at least both technical is because companies only ever kind

00:17:44.460 of die when they run out of resources okay it doesn't matter if it's money people time like

00:17:50.940 they just essentially if you can live long enough to iterate and learn at some point you know as

00:17:58.540 long as there's a problem to be solved in the market you'll figure something out and if the

00:18:04.460 way you learn requires you to spend money right like paying a development agency to spend money

00:18:11.260 then there's only so many shots on goal until you run out of money and it becomes dangerous

00:18:17.340 whereas if you bring somebody in-house and you're going you could always like defer salaries right

00:18:23.660 and and cue that up and trade it with stock options and um you know obviously if you're

00:18:29.500 paying for an agency you're paying a premium usually at least 40 more than market if not more

00:18:35.180 because they got to make their margins um so like to me i don't like having in the early days

00:18:43.100 having the engineering being done by a third party if i can avoid it maybe because there's something

00:18:49.740 needs to get built in the short term we just paid agencies instead of somebody available but in

00:18:53.980 parallel i'm going to backfill it with a part-time or full-time dedicated hire that i can negotiate

00:18:59.100 with that eventually I can bring on full time.

00:19:01.620 So just in general, I don't like and, you know, dev teams involved in early stage

00:19:07.340 startups because it makes it really tough for you to control spend.

00:19:12.260 And the other thing is, you know, they're just going to build whatever you tell them

00:19:17.100 to build and their their incentives are not aligned, meaning that they're going to make

00:19:22.820 more money, the more stuff they convince you to build, you're going to lose money.

00:19:27.100 the more stuff you build that doesn't actually solve a problem

00:19:30.460 or isn't as invaluable to your customer.

00:19:32.980 And, you know, the measure twice, cut once analogy

00:19:36.180 really matters in software.

00:19:37.780 It's why I'm a big fan of clickable prototypes.

00:19:40.420 Reverse engineering, you know, from the customer,

00:19:42.980 showing them the prototypes, getting them to give feedback.

00:19:46.140 Like by the time I'm spending money and time and resources on coding,

00:19:50.180 I want to make sure that it's pretty,

00:19:53.660 pretty guaranteed that what we're about to build

00:19:56.140 is valued by the market and and that's pre-sales that's um early adopter programs that's you know

00:20:03.020 getting paid to go build the thing people are like oh nobody's going to pay me to build this

00:20:06.940 every day there's this thing called consulting and custom development that's happening amongst

00:20:10.860 companies across north america and the world and people will pay for custom development so if

00:20:16.460 they're paying for custom development and you have an opportunity to build a software to solve the

00:20:19.820 problem they will pay you to be part of an early adopter program to get first access to a tool

00:20:25.340 that you guys are building as long as you show them what they're paying for through some kind

00:20:29.260 of interface through some kind of you know one pager that explains the product and how

00:20:33.420 it's going to solve the problem and then they're going to ask you questions like

00:20:36.140 does it have this feature it's like no in the first release it will not here's our roadmap

00:20:41.100 and as long as they're okay with that and it's a line that's great but yeah i'm not i mean long

00:20:45.740 long-winded answer to the question if you should have in-house versus outhouse um again if it's

00:20:50.940 short term just like a quick project i don't mind it but i do want my development team in-house

00:20:56.540 okay it's more of a contract to hire freelancer always yeah to me it's like i want to build my

00:21:02.220 team the team is what's going to keep you going long term so i shared a lot of stuff with you

00:21:06.940 chelsea i'm just curious based on things you've seen me share online you know you've been following

00:21:11.660 me for a while what is the most impactful thing i've ever shared with you that you like you know

00:21:18.300 that you've shared with other people or resonated the most with you either this conversation or

00:21:22.700 or even previously i'm just curious what's what's been the most definitely um all of the content

00:21:27.580 that you have on pre-selling the mvp to fund development that's something that i'm starting

00:21:33.020 the conversation with my co-founders about and building out sales process me like this is going

00:21:36.460 to be a better way than raising capital and selling part of the company and we're just trying

00:21:40.060 to make that kind of i think it's an emotional shift for for them uh to think of it that way

00:21:45.980 and that's been probably the most valuable out of all the contracts customer financing it's my

00:21:50.940 favorite thing get the customers to pay you to build the product and keep control of the business

00:21:56.540 as much as you can and keep as much of the business as you can and uh it just helps you avoid making a

00:22:01.180 lot of mistakes so i love that that's your answer chelsea i appreciate the time keep me posted on

00:22:06.140 on your progress and I look forward to talking to you soon. Thanks for your time today. All right.

00:22:10.560 Have an amazing day. Cheers.

Dan Martell - January 03, 2022

The Easiest Way to Launch a New Product

Episode Stats

Summary

Transcript