A few months ago I met with an early-stage founder about his growth strategy and his messaging. He hasn’t found messaging that attracts his ideal target customer profile, so he isn’t growing at the rate he’d like. We discussed some ideas and his current sales pipeline. He told me about a new outbound sales strategy that wasn’t part of his original plan, but it’s working. He’s working with a company that specializes in providing sales development representative (SDR) services to clients who don’t have dedicated SDRs or sales teams. It finds prospective customers, does cold outreach to them, and sets up demos on behalf of its client companies. It gets paid only when it books demos with prospective customers that it sourced. Said differently, it eats what it kills.  

This founder is having early success with this firm. I wondered how this SDR firm is finding the right type of prospective customers. What messaging is it using? Turns out, the founder had given it high-level information about the problem he’s solving and the solution he built. He instructed it to come up with fresh messaging that it believed would be effective in landing demos. The firm created new messaging based on what the founder provided.

Creating messaging is hard. Founders and their teams who’ve been in the weeds working on a product for months or years may struggle to come up with great messaging because they’re too close. It may be challenging for them to view things from the perspective of someone unfamiliar with their company or solution.

Working with an outside firm whose incentives are aligned with yours but that brings a fresh perspective is an interesting hack to get better messaging. You both want the same thing—more sales—but it’s able to see your solution from a perspective you can’t, which enables it to create on-target messaging easier than you or your team.

It sounds counterintuitive, but the more I think about it, the more sense it makes. An outside sales firm will take what you’ve built and explained to it and come up with simple messaging that’s more effective because it understands the outsider’s perspective (that is, the customer’s perspective!) better than you or your employees do.

This early-stage founder may have found an interesting way to solve his messaging problem in a cost-effective way. He pays only when good messaging created by an outside firm leads to demos with prospective clients. He doesn’t have to pay one firm to create the messaging and another to book the demos. He’s getting a two-for-one deal.

Today I met with another early-stage founder, and the topic of customer discovery came up. He said he’d done discovery, so I dug in and asked more questions. Two things stood out to me that we discussed in detail.

First, most of his customer discovery came from sending out surveys. (I shared my thoughts on surveys as customer discovery earlier this week—see here.) We discussed the benefits of doing more one-on-one conversations.

Second, a lot of his insights were based on a conversation he’d had with one customer. He’d built a lot of his product offering and website messaging in response to what he’d heard in this conversation. Learning from a conversation with a potential customer was a big plus. But one customer doesn’t confirm a pattern that leads to previously undiscovered insights.

Surveys are good, but not for initial discovery. Conversations are the best way to learn about pain that potential customers are experiencing. And you need lots of conversations with lots of people to uncover patterns and gain a deep understanding of problems and why they’re so painful.

I had a good conversation with a friend this week about the number of recent IPOs. He’s a physician, so this really caught my attention. If someone who isn’t a professional investor or entrepreneur is noticing the increased activity, it’s noteworthy.

I’ve noticed the uptick in IPOs and public market investors being receptive to buying shares in these companies over the last few months. Several companies have sold shares above their target range, meaning the company’s valuation and capital raised were more than anticipated. Positive signs like that excite entrepreneurs and investors to pursue more IPOs.

Though the IPO market is picking up, we’re nowhere near 2021’s gargantuan levels (see here). I’ll dig into the year-to-date IPO stats and share what I find. The end of Q3 is right around the corner, so I’ll likely wait until then.

This week I listened to the founding team of an early-stage startup describe their current traction. They’ve built a software product and have thousands of (nonpaying) users. To determine what features their customers would pay for, they sent them a survey. Twenty-five percent of the people who responded said they’d pay for a particular feature. So, the company built that feature and launched it recently. The results weren’t good. Only three (yes, three) customers bought it.

So, what went wrong?

The team surveyed customers; they didn’t talk to customers. Talking to customers involves picking up the phone or meeting a customer in person (one customer at a time is ideal). A conversation, if you aren’t leading them, will allow you to dive deeper into the customer’s thought process and experience. It’s iterative. You hear something you weren’t expecting (or didn’t know) and ask questions about it. That leads to something else you didn’t expect, and you ask more questions. The result of that loop is new insights about the customer’s problem. Do that with multiple customers, and you start to see a pattern. You now have a better understanding of the problem and how to solve it for the customer.  

What I described can’t be done with surveys. Surveys may have biased questions that don’t help you understand your customers. And they foreclose iterative interaction with your customers. Sure, they’re efficient and allow you to get a lot of feedback quickly, but the quality is often low, and it can lead you down the wrong path.

The lesson this early-stage team learned was to stop doing surveys of their users and start getting them on the phone. Conversations lead to insights. You can’t have a conversation in a survey.

Earlier this month, I shared that my weekend-only project to update my library won’t be completed until November at my current pace. I could either make peace with that or ramp up my pace to add more than two books per weekend.

Pondering the situation, I decided to finish the project well before the holiday season kicks off. I’m afraid that if I finish in November, I’d be more likely—with all the holiday distractions—to not begin another weekend project. I want to have established the habit and momentum of a new project before the holidays.

I’m going to add more books to the library every weekend. Four, or maybe even five. I’ll test it this weekend and settle on a number. My goal now: complete this project by mid-to-late October.

Wish me luck!

Weekly Update: Week Two Hundred Eighty-Five

Current Project: Reading books about entrepreneurs and sharing what I learned from them

Mission: Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

Cumulative metrics (since 4/1/24):

• Total books read: 80
• Total blog posts published: 525

This week’s metrics:

• Books read: 1
• Blog posts published: 7

What I completed this week (link to last week’s commitments):

• Read Invested, Charles Schwab’s autobiography detailing his founding of Charles Schwab Corporation and how he built it from a pioneering discount brokerage into a financial services company catering to individual investors
• Added two more books that I read in 2018 to the library on this site—see more here; they were about the $5 billion Malaysian 1MDB scandal and the high-stakes underground poker world

What I’ll do next week:

• Read a biography, autobiography, or framework book
• Add two more books that I read before 2024 to the library on this site—see more here

Asks:

• No ask this week.

Week two hundred eighty-five was another week of learning. Looking forward to next week!

Current Project: Reading books about entrepreneurs and sharing what I learned from them

Mission: Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

What I struggled with:

·      No material struggles last week

What I learned:

• The lawsuit by a group of authors against Anthropic, parent company to Claude AI, resulted in a $1.5 billion settlement last week. I’m still learning about this and similar cases brought against firms like Anthropic. From what I can tell, using books to train the Anthropic models isn’t what got Anthropic in trouble. The lawsuit was for copyright infringement and Anthropic not compensating the creators of the copyrighted books. Anthropic used pirated books to train its models, which means authors weren’t paid for the use of their books in model training, a key issue that appears to have led to the settlement. I get the impression that if Anthropic had purchased the books, it could have used them freely to train the models because the authors would have been compensated for the use of their copyrighted work.

That’s what I learned and struggled with last week.

In 2024, I challenged myself to accelerate my learning by reading a book (usually a biography) a week. To date, I’ve done it for 79 consecutive weeks. I wanted to share what I was reading and also keep track for myself, which was difficult (see here), so I created a Library section on this site. I added to it all the books I’ve read since my book-a-week habit began in March 2024, and I’ve committed to adding my latest read to the Library every Sunday (see the latest here).

That left the books I’d read before 2024 unshared and untracked. I set a goal to add my old reading to the Library over time. It began with a Memorial Day Challenge to add five books (see here) and continued with my challenging myself to add two books every weekend until my backlog is gone. This past weekend was my fifteenth weekend, and I added two more books:

• Billion Dollar Whale by Bradley Hope and Tom Wright
• Molly’s Game by Molly Bloom

That’s the latest update on my weekend goal. I hope that sharing these books will be of value.

Last week, I read about John Bogle’s journey to build Vanguard into an index-investing powerhouse (see here). That biography mentioned discount brokerages having been launched in the 1970s. Ameritrade was one of them, and I wanted to learn more about it, so I read the memoir of Joe Ricketts, founder of Ameritrade.

The Harder You Work, the Luckier You Get is a candid recount of Ricketts’s life in his own words. It details how he went from college dropout to struggling stockbroker with a growing family to founding his own discount brokerage firm in Omaha. Ricketts’s story was interesting because he didn’t found his firm (which ended up being a technology firm) near the financial capital, Wall Street, or the tech capital, San Francisco. He founded and scaled his firm in Omaha, Nebraska. Another thing that stood out to me was how regulation played a huge role in his success. In 1975, the government eliminated fixed commissions on stock trades, which opened the door to negotiated commissions and a new business model that Wall Street had never seen (and wasn’t ready for): discount brokerage. Ricketts and three partners launched First Omaha Securities, the predecessor to Ameritrade, that same year.

Ricketts’s early years were also interesting to me because they align with my interest in understanding the 1968–1982 era. Ricketts provides lots of perspective on this era and on how his firm navigated raging inflation and a bear stock market. A point Ricketts emphasized, and that I’ve read elsewhere, is that between 1968 and 1982, the Dow Jones Industrial Average lost 75% of its value, adjusted for inflation (inflation peaked around 12%).

Anyone interested in learning more about Ricketts, Ameritrade, the stock brokerage business, or how a nontechnical founder built a tech company should consider reading The Harder You Work, the Luckier You Get.

This week, I listened to an entrepreneur who’s building a software platform that helps online clothing sellers manage businesses that sell mostly through social media platforms, such as Instagram. The thing that caught my attention was that the company is focused on micro SMB sellers, who make up the majority of this fast-growing market. The company is performing well and has generated over $1 million in revenue.

I’ve shared my thoughts on the micro SMB market before (see here). I think it’s a great market that’s overlooked because people don’t know how to find and convert super-small business owners into customers. There’s no proven playbook. My interaction this week with this entrepreneur further increased my bullishness about this market.

Companies are being built right now to serve this market, and they’ll be massive companies in the next five years. By the time people realize the market opportunity, these companies will be so far ahead and so critical to how the micro SMBs operate that it will be extremely difficult to compete with them.