Does Your Solution Require Two Constituent Audiences to be Convinced?

Book cover - Lean StartupIn the world of mobile apps, as an example, a startup can create a minimum viable product (Lean Startup Methodology – order book here) and put it into the open market via multiple channels for direct consumption by interested parties.  In doing so, their primary burden in the beginning is on general awareness of the solution’s availability and hoping the target user will be attracted enough to try/buy the offering.  If so, they start getting orders and proceed from there.  But many other product ideas and associated business models have a “chicken-and-egg” challenge of requiring two constituent audiences to be convinced before business plan viability is achieved.

The situations usually can be described as having a supply side (often the service provider) and demand side (usually the consumer).  Online marketplaces always meet this criteria.  The supply side won’t want to commit to any costs unless there is a meaningful demand side already in existence.  But the demand side might not perceive any value unless there are any supply side offerings/providers to engage with.  So rather than get paralyzed with the situation, let’s explore some possible approaches.

Start with the Audience That Gets the Solution for Free

The inhibitors to getting someone to use your product are fairly limited when it’s free.  Whether it’s the supply side or the demand side that gets the solution for free, they will be more patient while you build out the other half of the equation to make the product fully valuable.

Also, it’s not fully required that they actually take possession of the solution in order for you to get the needed leverage.  Let’s us an example where consumers are the demand side.  Following Lean Startup principles, use inbound marketing (see related article titled “Inbound Marketing Explained“) to drive these consumers to a website landing page with info about your full solution.  Ask them to provide their email address if they are would like to be notified once the solution is available.  Armed with hundreds (or thousands) of such responses for your first target geography, you can use the validated interest to convince customers on the supply side to sign up as paying customers.

Start with the Audience that Gets Benefit from the Solution Even Without the Other Audience

It isn’t always the case where either the supply side or the demand side gets some nominal value from the solution even without the existence of the other audience.  But in the case that it does, you have the opportunity to start with that audience at a reduced charge until you can build out the other half of the equation.  Your business model (how you charge for the solution) can be such that as the other audience comes into the picture and engages, you make more money from the customer that originally paid very little.

I even came across a startup recently that requires three constituent audiences to be convinced before demonstrating viability.  The solution was an app for employees of retail outlets.  But for the business plan to be viable, the employee, the retailer and the retailer’s key suppliers must be convinced the solution is valuable.  Yikes, big hurdle – but still possible using the ideas above.

There’s another issue that relates to the pitch deck.  Almost all pitch decks describe the problem being solved first (see related blog article titled “Pitch Deck Flow“).  Should you literally split the slide into two columns showing the problems experienced by each constituent audience?  It’s great to solve problems for multiple audiences with your solution but if highlighting this causes the investor to ask questions about your obligation to convince these different audiences about your solution viability, you’ve just created an inhibitor to getting funded.  And if either of these audiences don’t know they have a problem (see related article titled “Aspirin or Vitamin, Which are You Offering?”), now you’ve also got to be an evangelist.  That’s a double inhibitor to getting funded.  One idea is to see if you can characterize one audience’s problem through the other audience.  For example, (use one of the examples above).  And as you later describe your customer acquisition strategy you’ll have an opportunity to explain how you solve the “chicken versus egg” problem.  Just don’t call it that.  What matters is how you’re going to get to revenue, so just show the path to revenue.

If you have a solution that requires two constituent audiences to be convinced, don’t give up.  Just make sure you think about the extra hurdles you need to cross and think about the best way to approach the two audiences (simultaneously or one first to establish half of the equation) and the best way to describe the problem solved in your pitch deck.

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Author: Gordon Daugherty

Over the past 15 years Gordon has seen nearly 1,000 startup pitches, advised more than 200 entrepreneurs and been involved with raising over $45M in growth and venture capital. Throughout his 28 year career in high tech, serving twice as President and three times as CMO, Gordon has both an IPO and a $200M acquisition exit under his belt. Now his emphasis is purely focused on helping startups and early stage tech companies. Through his Shockwave Innovations advisory practice and as Managing Director for Austin’s Capital Factory startup accelerator, Gordon is an active angel investor, VC and startup advisor.

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