This podcast episode of UX Leadership by Design features Mark Baldino, co-founder of Fuzzy Math, interviewing David Hirschfeld, founder and CEO of Tekyz. The discussion centers around Hirschfeld’s “Launch First” methodology, a process designed to help startups achieve product-market fit by validating revenue potential before significant development investment.
David Hirschfeld’s experience with successful and failed startups and his work with over 90 other startups informed the creation of this methodology.
UX Leadership by Design: De-risking Startups with the Launch First Methodology
This podcast episode of UX Leadership by Design features Mark Baldino interviewing David Hirschfeld, founder and CEO of Tekyz, a custom software development company. The discussion centers around Hirschfeld’s “Launch First” methodology, a process designed to help startups achieve product-market fit by validating revenue potential before significant investment in development. David’s experience with successful and failed startups and his work with over 90 other startups informed the creation of this methodology.
Hirschfeld’s Background and the Genesis of Launch First
David’s career began in enterprise software, where he founded a successful logistics software company he later sold. His second startup, however, failed, leading him to reflect on the key differences between success and failure. He founded Tekyz in 2007 and developed the Launch First methodology by observing patterns in his clients’ ventures. He realized the primary reason for startup failure was waiting too long to prove revenue and product-market fit.
Defining Product-Market Fit
Hirschfeld defines product-market fit as achieving a customer lifetime value at least three times the customer acquisition cost, in a predictable and repeatable manner. This involves estimating lifetime value and considering factors like lifetime licenses, which can provide upfront revenue and committed beta users. He argues that raising money through traditional methods dilutes equity without necessarily contributing to business growth or product-market fit, while pre-launch sales build a sales and marketing engine, generate revenue, and secure committed customers.
The Launch First Process
The Launch First methodology prioritizes proving revenue potential before building a full product. The process begins with:
1. Niche Analysis: Identifying the ideal target niche through a metrics-driven approach. This involves analyzing the cost and perceived impact of the problem the software addresses across various niches. The goal is to find a niche with high cost and perceived impact, indicating a strong need and willingness to pay.
2. High-Fidelity Prototype: Developing a highly realistic, interactive prototype that simulates the software’s functionality. This allows potential customers to visualize the solution without requiring a fully functional MVP.
These two steps often occur in parallel. Once the niche and prototype are defined, the process continues with:
3. Validation Interviews: Interview stakeholders in the target niche to validate the assumptions made during the niche analysis and refine the product’s focus.
4. Pre-Launch Sales: Creating a marketing funnel and outreach program to generate leads and conduct demos, ultimately securing pre-launch sales. This provides crucial evidence of product-market fit and generates revenue before significant development investment.
Determining Price and Addressing Founder Mindset
Hirschfeld recommends determining price by directly asking potential customers during validation interviews. He also emphasizes the importance of shifting founders from a “black robe monk” mindset, driven by unwavering belief in their vision, to a “white coat scientist” mindset, focused on testing assumptions and adapting based on data.
Pivoting and Failing Fast
The Launch First methodology encourages failing fast and cheap. If the metrics aren’t positive during validation interviews or pre-launch sales, it’s a signal to re-evaluate the niche or even the product itself. This allows for significant pivots early in the process, minimizing wasted development effort.
Key Takeaways
The Launch First methodology offers a structured, metrics-driven approach to de-risking startups by validating revenue potential before substantial development investment. It emphasizes the importance of niche analysis, high-fidelity prototypes, validation interviews, and pre-launch sales. By focusing on data and customer feedback, Launch First helps founders make informed decisions, pivot quickly when necessary, and ultimately increase their chances of success.
Transcript
[0:02–0:13] Mark Baldino: Hello and welcome to UX Leadership by Design. I’m Mark Baldino, your host. I’m also a co-founder of Fuzzy Math. Fuzzy Math is the user experience design consultancy that brings consumer-grade UX to business applications for B2B and enterprise tools.
[0:14–0:28] Mark Baldino: Today, I speak with David Hirschfeld, who is the founder and CEO at Tekyz, which is a custom software development company. Prior to that, David started two software companies and has advised over 90 along the way.
[0:28–0:44] Mark Baldino: And during that time, he’s developed a very specific methodology. And we break down this methodology during our conversation, but it’s all about product market fit. And David has seen enough folks fail because they don’t validate the revenue potential of their product.
[0:44–1:08] Mark Baldino: They focus on ICP and pitch decks, and then they actually build out their full MVP, and then they try to sell it. And this process is really around de-risking, getting to failure faster and cheaper, but following a metric-driven approach that helps clarify the root problem that your software, your organization is solving and paints kind of a realistic picture through high-fidelity prototypes and then gets people to sign up as customers early on.
[1:08–1:18] Mark Baldino: It sort of flips the script a bit. And so it’s kind of a really fascinating conversation whether you’re a founder, you’re working on a product team, you’re a startup, or maybe launching the next version of your SaaS product.
[1:18–1:32] Mark Baldino: I think the methodology could kind of assist all of you. So please enjoy the episode. If you have any comments or questions, feel free to send them my way. And then, as always, please like and share as you see fit.
[1:33–1:39] Mark Baldino: And thanks, as always, for listening. David, welcome to the podcast.
[1:41–1:43] David Hirschfeld: Thanks, Mark. Really happy to be here. Yeah.
[1:44–2:04] Mark Baldino: Yeah, no, excited and looking forward to our conversation here. I would love for you to just start by giving a bit of a background on yourself. I know you have kind of an interesting background and kind of what led you to, you know, your sort of current engagement and leadership at Tekyz.
[2:04–2:24] David Hirschfeld: Sure. I started out in the software industry and enterprise. They’re almost not quite 40 years ago. with working for Computer Associates and Texas Instruments, and then I became a consultant and ran projects in Intel, Motorola, Allied Signal, Arizona Public Service.
[2:24–2:45] David Hirschfeld: So I had a lot of enterprise experience in my early days. Then I started a software company in the early 90s in logistics, route distribution, inventory management, sort of pre-ERP, and grew that company to 800 customers in 22 countries and sold it in 2000.
[2:46–3:09] David Hirschfeld: So now I think I know what I’m doing as far as startup scale. I was VP of products for the acquiring company for several years and then left and went and tried to start my own company and did not follow the same playbook that I did with the first company just because it was kind of a different product, different company, and not realizing the things I did that made me successful the first time.
[3:09–3:23] David Hirschfeld: And the second one failed. So I have the experience on both sides, right, the failure and success. So from the ashes of that, I started Tekyz, my current company, in 2007, 18 years ago.
[3:23–3:35] David Hirschfeld: Tekyz is a custom software development company, and we have worked with over 90 startups during that time, a couple of them very successful, but the vast majority failed.
[3:35–3:38] David Hirschfeld: which is what led me to create the launch first methodology.
[3:39–3:49] Mark Baldino: Was the launch, we’ll get into that in a second, the launch first methodology. Was that built on the ashes of the failure? I mean, did you, if you don’t mind talking about that, the differences in it?
[3:49–3:49] David Hirschfeld: Not at all.
[3:50–3:55] Mark Baldino: Was that like lessons learned that you then applied in this methodology?
[3:55–4:13] David Hirschfeld: I knew some of the things that I did wrong in the second startup. I didn’t know all of them. And I didn’t understand the key things that I did wrong in terms of how I approached it until I had worked with probably 60 or 70 startups that I watched fail and succeed.
[4:13–4:25] David Hirschfeld: The few that succeeded had very consistent similarities, but the vast majority that failed all failed from my perspective for the same reason.
[4:25–4:35] David Hirschfeld: And then I started to realize why I failed the first time. And that’s waiting way too long to prove revenue, prove product market fit. So, yeah.
[4:35–4:46] David Hirschfeld: So it wasn’t because of my failure as much as it was just seeing the synchronicity between all these other failures and the differences between the few successes.
[4:47–5:01] Mark Baldino: As a professional services owner myself, what made you want to join RRanks after running startups? What made you want to get into the consulting side of the world and actually helping other people with their businesses?
[5:03–5:20] David Hirschfeld: Well, we were really good at building software. This is something that I knew I had a particular interest and skill set at, understanding not only how to assemble systems, but also how to create products that would get engagement.
[5:20–5:33] David Hirschfeld: Because even though I failed the second time, we did get really good engagement on the product. I just didn’t start charging for it. I went the route of trying to raise money, and I spent way too long trying to do that instead of generating revenue for my customers.
[5:34–5:45] David Hirschfeld: So anyway, so that was something I knew I could do and do really well, and there was a real need and demand for it at the time.
[5:45–5:52] David Hirschfeld: So it was just sort of like low friction brought me into becoming a service provider and building a software development company.
[5:52–6:02] Mark Baldino: Do you still have the itch of getting back in and owning and running a company that’s a software company, or do you feel like consulting is very important?
[6:02–6:22] David Hirschfeld: I didn’t. That’s a really good question. I didn’t at first. It was like a lot of founders that fail. I was like, oh, God, I’m not doing that again. But that didn’t last for very long. And then it wasn’t long before I took a partnership with one of my clients in the healthcare industry, a company called Anzu.
[6:22–6:34] David Hirschfeld: And then I continued to think about products. In fact, right now, this year, we’re going to be releasing a couple products, not Anzu, but Tekyzville, SAS products.
[6:34–6:44] David Hirschfeld: because of the AI revolution and the ability to identify and automate certain discrete workflows that have huge value.
[6:45–6:54] David Hirschfeld: So we’re going to be creating some SaaS products that we’re going to be releasing this year. So I want to get back into the software world because I really like owning a product.
[6:54–7:09] Mark Baldino: That’s awesome. I want to dig in on this because it’s like in the back of my mind, there’s always been products. We don’t do development, right? We’re just design. So it’s like there’s that whole other side of the world that’s like you get involved in.
[7:09–7:21] Mark Baldino: But do you have to make changes in the structure of your consulting? This is maybe too in the weeds for some folks. But have you had to make changes in the structure of your business to actually transition it from a consulting business to a product business?
[7:23–7:37] David Hirschfeld: Ultimately, there’ll be some changes, especially as the products start to take off. But no, not really. because we have a development team and our development team does a lot of support for existing customers.
[7:37–7:50] David Hirschfeld: It’s not just building a startup product, but it’s also being the outsourcing technology group for that company. So that won’t be very different other than they’ll be our own products internally.
[7:50–7:59] David Hirschfeld: And then of course, the marketing, the sales, that will be different than what we do for the service side.
[7:59–8:02] Mark Baldino: Okay. And your clients are the same, right?
[8:04–8:05] David Hirschfeld: In what respect?
[8:06–8:22] Mark Baldino: The things that you’re going to automate, those discrete services that are, some humans are doing now, your clients need, I’m thinking you’re doing it as part of what Tekyz is offering in your service offering, and you’re going to take some of those and automate them.
[8:22–8:29] Mark Baldino: And therefore, like the people you sell, your consulting services might be the same people that you sell the SaaS service. But I made a leap there without actually asking.
[8:29–8:39] David Hirschfeld: Actually, a little bit different. A little bit different. The consulting services we’re selling to existing companies that need software development, not selling to software development teams.
[8:40–9:06] David Hirschfeld: So some of the products we’re developing will be targeting software development teams, other firms like mine. Some of them, one of the products that we’re building a workflow around will be for marketing agencies because the company that I use to help me with marketing is the one that identified this workflow that needs to be automated. And there aren’t good products out there that do this. So we’re just going to automate it and then we’re going to jointly market that product.
[9:08–9:42] David Hirschfeld: And one of them is related to Launch First to help start the niche analysis piece, which is a very fatiguing process. There are several products. And then one of them is because I started doing podcasting with the idea that I would start to develop a referral network of other people like me and like the people that interview me or that I interview in my podcast. And there’s not a really good low-hanging fruit kind of referral partner network for managing referrals out there. And so we started building that. That one, this week, we’ll have our MVP ready,
[9:42–9:53] David Hirschfeld: which we’re building an MVP for ourselves because I need the product, right, for the referral partners as opposed to doing a peer launch first approach.
[9:53–10:12] David Hirschfeld: And then I can start to add the people that are adding as referral partners to the system and then they get a login so they can give referrals or see what the state of the referrals and how much they accrued in terms of referral fees. And then, of course, they go, well, I could use this for my referral
[10:12–10:26] Mark Baldino: partners, and it’s sort of a natural. All right. In the space, I might be a target user. Feel free to meet some alpha, beta folks. Let me know. It’s a good transition because you talked a little bit about how you’re launching this maybe a little bit slightly differently.
[10:26–10:41] Mark Baldino: You’re doing your MVP internally. But I’d love to talk more about sort of the launch first framework and methodology. And where I’d like to start is like a little bit of a primer on when you say product market fit, what does that mean?
[10:42–11:01] David Hirschfeld: Okay. All right. So product market fit, from my perspective, is a pretty straightforward equation. It means that whatever it costs me to acquire a customer in terms of sales and marketing costs, that lifetime value of that customer is at least worth three times what that cost is.
[11:01–11:12] David Hirschfeld: And that I can do that in a predictable, repeatable way so that I can scale. Scale at least in terms of that niche that I’m marketing to where I’ve proven product market fit.
[11:12–11:25] David Hirschfeld: That’s product market fit. You know you have it because people are paying you money for your product. If you can’t get people to pay you money for your product in enough numbers where you can get to that 3 to 1 ratio, then you don’t have product market fit yet.
[11:26–11:34] Mark Baldino: More than just will you pay for this. It’s will you pay for this in a long enough term that I’m going to get 3x back on the cost it takes to acquire you.
[11:34–11:46] David Hirschfeld: Right. And some of that you have to estimate because you don’t always know what the lifetime value is early on. But depending on how you do launch first, you might be able to nail that down even in the initial sale.
[11:46–11:59] David Hirschfeld: Because a lot of times, not always, but a lot of times we’ll do lifetime licenses as part of the launch first sales approach, which people go lifetime licenses. I’m never going to do that because then I don’t get any more revenue from that client, which is not necessarily the case.
[11:59–12:16] David Hirschfeld: Because once you have a client, a customer using your software, you have the ability for upsells in the future when you have new capabilities to upsell them or new services. But more than that, if you think about what most people do, and that’s they create an MVP and a pitch deck and try to raise money.
[12:17–12:38] David Hirschfeld: And when they’re raising money, maybe $250,000 to $500,000 are giving anywhere from 10% to 25% of their equity away in that initial raise. When you sell lifetime licenses and all the work you do to raise that money, none of that does anything to grow your business or to move you on the path of being able to generate revenue and have product market good.
[12:38–12:49] David Hirschfeld: Seems like it does, but it doesn’t. Whereas when you’re doing launch first, you’re marketing to your customers, right? So you’ve got a sales and marketing engine that you’ve developed. You are successfully closing business, so you’re generating revenue.
[12:50–13:02] David Hirschfeld: And the people that are buying in, whether it’s a classic prelaunch or whether there are different models of prelaunch sales, you now have a very committed beta customer because they’ve paid money for your product.
[13:02–13:14] David Hirschfeld: And you’re generating the same amount of revenue that you would from raising from a seed investor. And usually you’re giving away an immeasurable fraction of a percent of your market, not 20% equity.
[13:15–13:21] Mark Baldino: So one of your core recommendations for your clients in Launch First is that they do lifetime membership?
[13:21–13:38] David Hirschfeld: No, it’s really dependent on the business model. Okay. Right, right. So it depends on the product. If it’s like a subscription-based product where they’re paying like a yearly subscription or monthly subscription, then lifetime licenses often make a lot of sense.
[13:39–13:58] David Hirschfeld: Because you can come out with new features later on that they’re paying for and they’re paying subscription fees for those at some point in the future. But the thing about getting these customers, aside from it helps you generate revenue and offset development costs from customers, is that now you get people using your product and you’re working on product solution fit.
[13:59–14:13] David Hirschfeld: not product market fit. MVP should not be for product market fit to validate it, which is what most people use an MVP for. It should be for product solution fit for validating that. And for people that don’t know what that is, the difference, product market fit means people are buying your product.
[14:13–14:28] David Hirschfeld: Product solution fit means now people are using your product. Whether that’s something they would buy or not, are they now using it to get the value out of the product in a way that keeps them as a customer, right, engages them so they stay a customer?
[14:29–14:36] David Hirschfeld: and that it’s not falling short in significant ways that opens up the opportunity for competitors to take them away.
[14:36–14:40] Mark Baldino: Is your recommendation that they do product market fit to get to the MVP?
[14:41–14:51] David Hirschfeld: Product market fit to prove they’ve got sale or they’ve got a saleable product, right? And that there is actually a business there. Because a lot of people build a product where there really is no business.
[14:51–14:57] David Hirschfeld: They don’t realize it until they’ve made a huge investment in the product only to find out nobody wants to buy it.
[14:57–15:09] Mark Baldino: It kind of merged these two things and think of them as the same and maybe even do the MVP first. As you said, I got this great deck or I have this prototype. Now I want to go see if I can either raise funds, which is a little different, but can I grow revenue out of this?
[15:09–15:19] Mark Baldino: And you’re, as you alluded to earlier, directly stated, people are going too far without confirming that there’s a revenue potential here.
[15:19–15:31] Mark Baldino: Exactly. Is it safe to say that’s the single biggest mistake you saw in the first 60 startups and maybe your experience? So what is the process to avoid that issue look like?
[15:31–15:44] David Hirschfeld: You start getting people to buy your product before you build it. So and the way we do that is we build what I call a high fidelity prototype, which is a very animated set of mockups.
[15:44–15:57] David Hirschfeld: It’s much more features and function than you see in an MVP, but there’s no software there. But when you demo it, it looks like real software. And that’s a critical success factor in doing prelaunch sales.
[15:58–16:08] David Hirschfeld: Because when you’re doing a demo to somebody, if they see something that just looks like click-through mock-ups, their first question is, how do I know you can build this?
[16:09–16:22] David Hirschfeld: And if you get that question, they’re not going to buy it. If you build a realistic enough demo out of the mock-ups so that when you demo it, they cannot tell the difference between that and real software, then that question never happens.
[16:22–16:33] David Hirschfeld: Even though you don’t lie to them, you tell them it’s a prototype and that what they’re seeing, the first version of the software won’t be out for three to four months and won’t have all these features.
[16:33–16:47] David Hirschfeld: They don’t hear that. You know, their brain makes up a story that, oh, well, this month they must be in development, have just finished testing, but the software looks great. And, you know, you never, I never suggest anybody ever lie to anybody.
[16:47–16:56] David Hirschfeld: But you want them to see something. You want them to see exactly how this software is going to operate and behave when they get it because that’s what they’re buying.
[16:56–17:14] Mark Baldino: So step one is this very realistic, high-fidelity, clickable, interactive at some level, concept car prototype. And then how do you go from that to, hey, person A, person B, would you actually pay for this or would you give me money for it?
[17:14–17:26] David Hirschfeld: Well, I want to go step one is actually doing the niche analysis. And often we’ll do that in parallel with doing the design and development of this prototype. But it’s really important.
[17:27–17:47] David Hirschfeld: So all founders have one job when they’re starting a new product or business. It’s the number one job, and none of them understand this. Neither did I for a long time. And that is if you think about where you’re starting from, you’ve got this product that you believe will solve the problem in some industry or for people in whatever that is.
[17:47–18:00] David Hirschfeld: You’re solving a problem. And there’s a lot of different niches that you can market this product to because usually the problem has some kind of broad base of people struggling with it, but in different ways from different niches, right?
[18:00–18:15] David Hirschfeld: And then when you think about the problem or problems you’re solving and you think about it from the perspective of each of these niches, it boils — you can get deeper into what the real root level problem is from the perspective of these stakeholders.
[18:15–18:40] David Hirschfeld: And that’s a critical success factor is knowing the root level problem. And, you know, you’re at the root level problem when somebody is, when you can say to somebody or when somebody says to you, I hate this problem or I’m afraid if I don’t solve this problem that, you know, that this will happen and that will cause me some kind of personal, you know, negative thing.
[18:40–19:14] David Hirschfeld: thing like my career will never advance I’m going to lose competitive position in the market you know I’m going to lose all my restauranteurs are my my patrons it’s going to my advertising costs are going to double because to try to overcome those bad ratings whatever the thing is it has to boil down to my life is where will be worse because I don’t solve this problem for this reason that’s a root level problem and usually you’ve got about 10 or anywhere from 8 to 15 different root level problems when you start to really distill it out from the standpoint of a stakeholder.
[19:14–19:42] David Hirschfeld: So as a founder, you have one job when you’re starting a company, and that is only one of those niches can you market to. So which one of those niches do you pick out of the 10 or 15 or 20 niches that you’ve identified? And which is the top one or two or at most three root level problems that you’re going to address initially? Right. And so what we do is we have a metrics driven methodology for figuring this out.
[19:42–20:05] David Hirschfeld: Because that also informs, once you know who that is and what those root level problems are, that informs how you’re going to do the outreach to speak to those people, how you’re going to demo the product in terms of the language and where you’re going to focus even if the thing you demoing has the two roadmap and all the features but you going to make that demo very focused on their problems the ones they need solved
[20:06–20:24] Mark Baldino: So a founder or organization, they have a lot of niches. You help them select one, and then you do niche analysis. You do this sort of deep dive into what’s the root cause, or what’s the cause of this problem until you get to the bottom, which is a root cause.
[20:24–20:40] Mark Baldino: And I understand that that’s an acute pain that somebody can clarify. And they can not only say this is a problem, they can talk about where it’s bubbling up in their lives and what it’s going to cost them, either dollars or emotionally, whatever it is.
[20:41–20:49] Mark Baldino: They can quantify that pain to you. And then you feel like, okay, I have a root cause or maybe I have two or three. Am I understanding that? Did I reframe it?
[20:49–21:06] David Hirschfeld: Sort of. Sort of. So you got the gist of it, but the difference is you’re not picking the niche. The niche picks itself from the metrics that you gather in doing this analysis because you don’t want to pick a niche.
[21:06–21:20] David Hirschfeld: You want the numbers to say this is an ideal niche for early adopter and doing sales. And you know they’re the ideal niche because whichever problems are the most significant to them, there’s two things we measure.
[21:20–21:33] David Hirschfeld: One is cost. How much does each of those root problems cost each stakeholder in each of these different niches? And the second number we grab is what is the perceived impact? That’s that fear, right?
[21:34–21:47] David Hirschfeld: What is that perception, how much this problem impacts them personally? And both numbers have to be high. And the reason for that is you might have a really high cost with one of these intersections.
[21:47–22:15] David Hirschfeld: these intersections, so think of this as a spreadsheet. With each intersection of the spreadsheet problem on the left and niches on the top, each one is a measure. And you might have a really high cost, but you’re talking to a stakeholder who’s the decision maker, who’s in an industry where this problem is endemic in the industry and everybody deals with it and I’m not going to get, you know, this is just not important to me to fix it right now because my life isn’t going to change if we do.
[22:15–22:29] David Hirschfeld: So, yeah, we’re going to save a lot of money, but that’s not my big motivation today, right? My motivation is competitive pressures or this or that, or I won’t get management support to make that change because nobody cares, right?
[22:29–22:39] David Hirschfeld: Everybody is like they want their focus on something else. That’s low perceived impact. So that’s not a good one because you can’t get their attention when you start marketing.
[22:39–22:53] David Hirschfeld: They’re going, who cares about that, right? When you flip it the other way around, you’ve got a high perceived impact. I hate that. That drives me nuts, that problem. But then you measure the cost and it’s really low. So you can’t charge them very much for it, even though you can get their attention and they’re going to want to buy it.
[22:54–23:06] David Hirschfeld: But there’s not enough of them and the amount you’re getting for it isn’t enough. So that’s not a good target for early adopters. So you’re looking for where both those numbers are really high for their top two problems, three at the most, right?
[23:06–23:12] David Hirschfeld: And then there’s other things we do to then validate that really is the right early adopter
[23:12–23:13] : niche. Okay.
[23:13–23:24] Mark Baldino: So it’s that high cost, high fear, high impact. Right. And when you find that alignment across the niches, a niche is going to come to the top and say, this is the one you should focus on.
[23:25–23:25] David Hirschfeld: Exactly.
[23:26–23:30] Mark Baldino: Do you feel, and you’ve done this for 90 plus startups.
[23:30–23:43] David Hirschfeld: No, I figured out this after having watched, you know, most of those startups fail. Okay. Yeah, I’ve done this probably for about like five startups at this point.
[23:43–23:52] David Hirschfeld: Okay. of which three of them were successful. Okay. Yeah, getting sales and getting the product market fit before we started developing their software, yeah.
[23:52–24:04] Mark Baldino: So founders are peculiar folks. You and I both founded companies. You founded a few of different types. I’ll speak for myself. At times, I like to have all the answers.
[24:05–24:18] Mark Baldino: I feel like I know where the direction of my company is, and I kind of drive from that perspective. I set the vision, and we’re going to march towards it, right? And I think a lot of founders share that. And that’s, I think what some people perceive is make founders very successful.
[24:18–24:29] Mark Baldino: It’d be hard to change founders’ minds. Do you find, as you started to implement the launch first sort of methodology, that that’s been easier? Are you helping founders get out of their way?
[24:30–24:33] Mark Baldino: Is it helping, like, shift founders’ mindsets?
[24:33–24:44] David Hirschfeld: It helps, yes. But you can’t, like, you can’t fix somebody that’s got a personality flaw. And I’m not suggesting that my founders have personality flaws, but you know what I’m saying, right?
[24:44–24:56] David Hirschfeld: It’s very hard. The problem is most founders believe in they have a vision. They believe in themselves. They believe in their vision and those which is fine as a starting point.
[24:56–25:15] David Hirschfeld: But those are if you don’t get out of it, if you don’t abandon that concept, then those are code words for I’m going to fail. So founders that are consistently successful understand that their beliefs are nothing more than that, that their assumptions, that they have to measure them, they have to validate them.
[25:15–25:27] David Hirschfeld: And if they can’t validate them, then they need to adjust to something that is provable and validatable. So what I always say as a founder, most founders come in wearing the black robe.
[25:27–25:50] David Hirschfeld: They have black robe syndrome, right? They believe in their vision. And they’re sure if they just work hard enough and stay focused and true to their path, they’ll be successful. And I gently peel that black robe off of some of them and then try to wrap them in a white coat and turn them into clinicians where they are setting up tests and measuring the results of the things and understanding what’s an assumption and what’s proven.
[25:51–25:58] Mark Baldino: It’s a great metaphor, shifting them from the black robe magician to the white robe scientist.
[25:59–26:08] David Hirschfeld: And very clearly. The black robe monk. Monk. Yeah, not magician, monk. Yeah, right. Believer, you know, religious leader, right? They believe.
[26:08–26:15] Mark Baldino: Yes, yes. Black robe monk to the white coat scientist is a very powerful, very powerful.
[26:15–26:15] David Hirschfeld: Yeah, right.
[26:15–26:26] Mark Baldino: I asked this question earlier, and then you backed into the niche analysis and kind of said you could develop the prototype. And so it sounds like those two are going to work in concert. Yeah, they do.
[26:26–26:32] Mark Baldino: What are the next few steps or maybe step along the way in the framework?
[26:32–26:46] David Hirschfeld: So once we’re sure we’ve got the right niche and there’s more steps involved to validate that, there are assumptions that are made during that process, but there’s a constant outreach whenever you’re making an assumption that’s based on really unknowns.
[26:47–27:08] David Hirschfeld: So then you do outreach to stakeholders in that niche to verify what they’re struggling with. And then at the end of that niche analysis process, we do an interview process, not discovery interview, but a validation interview, because now we’ve built a model for who we’re marketing to, why we’re marketing, how much we should charge, what their value proposition, all that stuff, the language we should use.
[27:09–27:23] David Hirschfeld: And then we go and do 15 to 20 interviews to stakeholders in that niche to validate this process, to validate that our assumptions were correct. We’re building the prototype usually in this process because usually we don’t make an entire change of the product.
[27:23–27:34] David Hirschfeld: It would be a rare case where the product completely changes because of these interviews. And then we’ll have subtle changes in other areas, what we’re focusing on, emphasizing and deemphasizing, other things that we realize nobody cares about.
[27:35–27:54] David Hirschfeld: But for the most part, it’s still the same product, right? So we’re building the prototype, and we’re not building just for those stakeholders. is we’re building out the big vision. Because basically when you do the demo to somebody, you’re saying, you know, talk about their problems and how this addresses their problems and look what else you’re getting.
[27:54–28:05] David Hirschfeld: Because you can see the big vision of the product. And then create a marketing funnel and an automated outreach program to get people to come to either your one-on-one demos or to webinars.
[28:06–28:16] David Hirschfeld: And then put together presentations for demoing the product with some high value offer to them. If they buy in early, they’re going to get this.
[28:17–28:36] David Hirschfeld: So, right, then they’re going to spend this kind of money to buy in early, but then they’re going to get all this for it. And if it’s a product, if you’re solving a big enough problem that has a big enough cost and a big enough perceived impact and you give them a big enough value up front, then you can sell in enough numbers, and this is clear proof that you got product market fit.
[28:37–28:51] Mark Baldino: How are you helping them determine the cost? Like, to me, one of the key components of product market fit is, like, how much? So, yes, there’s a big enough problem. Someone’s going to be willing to pay for it. We have a product in front of us, this prototype, that we think solves for those issues.
[28:51–28:58] Mark Baldino: We’ve kind of walked you through it. But how do you help them determine, like, the actual price somebody might be willing to pay for this?
[28:58–29:23] David Hirschfeld: Well, in that validation interview, we ask them. Like, we come up with this is how much it costs. So if we were, you know, this problem is costing you this much. So if we charge this portion of that much, you know, whatever that is, factored over whatever period of time, you say this is what we’re planning on charging for the product, the different kind of licensing, how does that — do you think that people would pay for that, right?
[29:23–29:31] David Hirschfeld: Or you ask them how much would you pay for this product. It depends on who the client is and what the situation is. And then you’re setting up marketing formal.
[29:32–29:32] Mark Baldino: Right.
[29:32–29:45] David Hirschfeld: Right. And that’s sort of at the end of this validation interview where you’re because you said, here’s a problem that we understand people like you have. And they say, yes, oh, yeah, that problem’s really big.
[29:45–29:56] David Hirschfeld: And here’s how I calculated cost of that problem. Oh, yeah, it’s that much or more. And then you say, OK, this is what we were thinking would solve that problem.
[29:56–30:20] David Hirschfeld: Would that solve that problem for you You know yes that would be fantastic I need that right away this is what we were thinking of charging for that Oh people will pay for that No problem You can probably charge more. You know, we’re looking for about 30% of the interviewee, the people we interview to give us that kind of strong affinity. And if you’re getting that, then, you know, those will probably be your first customers. Right. You’re starting to, as you said, you’re starting to build
[30:20–30:36] Mark Baldino: that funnel and get your early adopters. When do you, because, so two things. One is sometimes product and engineering design sometimes fear this, like we’re going to go out and demo something that’s not real, and then we have to deliver on it.
[30:36–30:46] Mark Baldino: I mean, it sounds like you’re giving a little bit of a runway, but like how do you, let’s say you’re getting positive feedback. Like when do you advise your clients, like, hey, you should actually start putting the MVP together and this is like your.
[30:46–30:58] David Hirschfeld: Oh, as soon as we’ve proven you’ve got product market fit, right? Which is so that you can continue to sell this pre-launch at a predictable closing rate.
[30:58–31:18] David Hirschfeld: Right. You might need three sales. You might need 10 or 15 sales, depending on the product and the cost and all that. And then you know at that point it’s time to start working on the MVP. And you can continue to sell, do the pre-launch sale, while you’re building the MVP to basically acquire more funds from customers and a larger pool of beta customers.
[31:18–31:21] Mark Baldino: And it sounds, you mentioned this before, it sounds metrics-driven throughout.
[31:22–31:27] David Hirschfeld: Yeah, if you’re not proving it, you know, if you’re not measuring and proving, then there’s no point in doing it.
[31:28–31:39] Mark Baldino: If they get through halfway through the process and, like, they’re not, it’s not vetting out in the validation interviews, I mean, do you recommend people go back to the niche analysis and, like, find a new niche?
[31:39–31:44] Mark Baldino: Or is it, like, sometimes you say we’re not, this is not a good idea and also say it nicely.
[31:44–32:16] David Hirschfeld: Oh, no, that’s possible, too. But usually, I mean, usually what we bubble chart those two numbers, the cost and the perceived impact, we bubble chart them. There’s usually two or three niches that float up into the upper right. One usually looks like it’s the clear winner, and sometimes it is, and other times there’s other factors that drop that niche out of a good early adopter niche. Like, for example, maybe the stakeholder are CEOs of Fortune 1000 companies in a particular industry, and it’s a small market.
[32:16–32:27] David Hirschfeld: They’re very expensive to reach, and the sales cycle’s really long. That would drop — those are all factors that might drop that niche lower than another niche where the sales cycle’s much shorter, much easier to reach those people.
[32:27–32:51] David Hirschfeld: Cost to reach them is much less expensive. Things like that. So willingness to make a quick decision, you know, other things like that. So if we get to the validation interviews because one seemed like the clear winner, but it turns out we’re not getting that affinity from those people, then we drop that niche and we go to the next one, which we’ve already done that deep dive on to understand, you know, where they sit in the niche.
[32:51–33:04] David Hirschfeld: And one of those top three, usually in the top two or three, one of those is going to give you that high affinity. If nobody is, you’re not even close, then or let’s say you do get that affinity, but then you go to launch first and nobody’s buying it.
[33:04–33:20] David Hirschfeld: You can’t seem to get any sales. Then you might want to ask yourself, maybe this is I should fail fast and cheap. Think of it like this is the wrong time for this product in this market. There’s other factors at play that I did not consider or I wasn’t honest with myself in this process.
[33:20–33:32] Mark Baldino: I appreciate you saying that last part about failure and fail fast and cheat because I think sometimes people hear metrics driven and you can convince yourself that the metrics are saying one thing.
[33:32–33:43] Mark Baldino: But there should be points along the way, and I’m sure there are. It sounds like there are, where the metrics might be telling you to reevaluate and go back two steps and rethink. Or maybe this is a failure and that’s okay and there’s a learning in it.
[33:43–33:54] Mark Baldino: Because I think sometimes when people, I don’t know if it’s natural inclination, like you start on a path and it’s like we’re going through this till we burn through our life savings or all of our runway and all the capital.
[33:54–34:02] Mark Baldino: I think part of the idea here is you’re actually helping them make smarter financial decisions and figure those out earlier in advance.
[34:03–34:20] David Hirschfeld: And hopefully if they do are going down the wrong road, it’ll be obvious and they can pivot early, you know, make really big pivots early because there’s no software they have to rewrite. Right. And and redoing the prototype design is like a fraction of the effort that it takes to do the same thing to the software that you’ve completed.
[34:20–34:32] David Hirschfeld: So I’m really encouraging when the numbers aren’t coming out right. There should be some kind of evidence what would be the right target in terms of product and problem and things like that.
[34:32–34:44] David Hirschfeld: And then shift. And, you know, at some point, you’ll either realize that there’s just not no here here or that you’ve figured out a formula that’s going to work. And now it gives you an anchor to build a business around.
[34:44–34:55] Mark Baldino: It’s been absolutely fascinating. And I appreciate that you’ve laid out a framework. It’s, to me, it’s very logical and it makes a lot of sense. It’s not filled with a lot of buzzwords.
[34:55–35:09] Mark Baldino: So I’m really enjoying it. If you would indulge me as we wrap up a little bit, to go a little bit meta, which is to think about like, you probably did niche analysis on your customers and you came up with, this is the group of people that I want to serve.
[35:09–35:19] Mark Baldino: And this is their root cause. This is sort of the root cause. Like, what’s the root cause that Launch First and that Tekyz is solving for these startups?
[35:20–35:20] : Okay.
[35:21–35:33] David Hirschfeld: So it’s really simple, I think. And that is to, if you can’t generate revenue from your product, then don’t bother building it.
[35:34–35:47] David Hirschfeld: And since you can generate, and by the way, there are lots of examples in the world of people that did pre-launch sales. I’ll give you a really, really famous one, Elon Musk, with his electric sports car.
[35:47–35:59] David Hirschfeld: Do you remember that? His very first version of a Tesla electric sports car, it was a prototype. It didn’t exist. And he raised gobs of money on that, right, before he had a name.
[36:00–36:11] David Hirschfeld: So prelaunch sale, just typical prelaunch sale. There are many software examples of this, too. So it’s not as uncommon as it sounds like. There’s also different ways of running a pre-launch.
[36:12–36:27] David Hirschfeld: One of them is called a concierge launch. Other people call it a Fred Flintstone launch. So if you know who Fred Flintstone is, for people to, yeah, right, you know, caveman, but he drives a car, but there’s no motor in the car.
[36:27–37:00] David Hirschfeld: He has to spin his feet under the car, right, because there’s no engine. So we call that a concierge launch. Basically, you’re selling the vision, but then you start to deliver the service immediately with cobbled together workflows and services and some manual effort because it’s a blend of technology and service that you’re selling. And sometimes people can’t wait. They’re not going to buy something three or four months in advance because they need it now, and that’s what they’re paying for. So we do a concierge launch, which, by the way, are my favorite because you really learn how to run your business right away. But you might not have been able to sell the service
[37:00–37:16] David Hirschfeld: without the software to demo so they can see what they’re buying into. That’s one way to launch. Another one is the classic pre-launch where they don’t buy — they’re buying something and nothing will be available for three to four months until the first version of the MVP is up.
[37:18–37:34] David Hirschfeld: So back to your question, for launch first, any — it’s SaaS, B2B SaaS startups. It was the target for us because B2B SaaS startups fail in massive numbers, and they fail for the same reason.
[37:34–37:45] David Hirschfeld: Well, according to studies, there’s two reasons why they fail in terms of one’s 48%, 2%, and one’s 38%, and I don’t remember which is which. One is they run on money.
[37:45–37:59] David Hirschfeld: Two is they lack product market fit. And depending on the study you’ve seen, it’s one or the other which is above or below, right? So that’s, you know, 84, 82, 88, 82 percent, according to the studies.
[37:59–38:13] David Hirschfeld: But that fail for those reasons. But I suggest that the reason they fail running out of money most of the time is because they lack product market fit. So I think that number for product market fit is much bigger than that.
[38:13–38:33] David Hirschfeld: And the reason I say that is you may have run out of money and you are generating revenue, but you’re not generating enough revenue and you haven’t figured out your market well enough to have enough profit in there that you can reinvest back into your business without, you know, taking loans or, and so you’re just, you might have revenue, but you have no profit.
[38:34–38:36] David Hirschfeld: So you don’t have product and market fit if that’s the case.
[38:36–38:42] Mark Baldino: So you’re helping them de-risk the process, either if they’ve started and you can back up a few steps or before they get rolling.
[38:43–39:00] David Hirschfeld: De-risk and speed it up. If you’re going to fail, you’re going to fail in three, four, five months with this, not in three, four or five years, assuming that you believe the result. I’ve had people get through it and still want to build their MVP because they’re sure if they have the product, now it’s going to sell and it doesn’t pan out.
[39:00–39:07] David Hirschfeld: So, right. There are probably rare cases where it would, but 90% of them, yeah.
[39:07–39:20] Mark Baldino: As you said, some of those folks are — maybe they haven’t taken off the black robe and been quite the scientists because you do need to listen to the metrics and kind of check the process. So, well, like I said, David, I’ve thoroughly enjoyed the conversation.
[39:21–39:34] Mark Baldino: I’ve been in the background thinking of like, oh, how can I do this just as a consulting service? How can I do some niche analysis and ensure I’m doing product market fit? And I’m sure the listeners here will be enjoying it as well.
[39:34–39:36] Mark Baldino: So I just want to say thank you very much for your time today.
[39:36–39:37] : Much appreciated.
[39:37–39:41] David Hirschfeld: Well, thanks, Mark. I love talking about this and your questions were really spot on.
[39:42–39:52] Mark Baldino: Right on. Well, I will include your contact information when we post this. Folks, if you’re in need of product market fit and want to try out the launch first framework and methodology, reach out to David.
David Hirschfeld founded Tekyz, a company dedicated to transforming business software development. With over 30 years of experience, his journey began with a physics degree from UCLA and a successful sales career at Computer Associates. After launching and selling his first software company in 2000, David found his passion for empowering entrepreneurs.
He developed the Launch 1st™ methodology, which focuses on generating revenue before coding begins. This helps startups gain traction while minimizing risks. With a commitment to innovation and collaboration, David leads Tekyz in providing AI-powered development and SaaS solutions, making a meaningful impact in the tech world.
Tekyz is set to launch two new AI applications: one for automating the Launch 1st Methodology Niche Analysis and Estimiz, an AI-based project estimation tool. Outside of work, David enjoys golfing and woodworking.
You can learn more about David Hirschfeld and Tekyz by following his LinkedIn profile — David Hirschfeld LinkedIn Profile.
For more information about Tekyz’s services and how they can help you harness the power of AI in healthcare, visit tekyz.com or contact the founder directly at [email protected].
Sell Before You Build for Faster Product-Market Fit was originally published in Tekyz Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
