Opinion
When product enthusiasm masquerades as market demand
“Early-stage startups can mistake enthusiasm, pilot opportunities and positive feedback for validation or proof of a market,” writes Omer Shachar, Managing Partner at Next Gear Ventures and Founding Partner at Drive TLV. “Demand becomes more credible when customers are prepared to change, buy and deploy.”
A founder of a young company meets a major corporation. The meeting runs long, the executives understand the problem immediately, someone asks to see a demo and another person suggests a pilot. The founder leaves the room feeling that months of work have just been validated. Maybe that feeling is justified. The question I keep coming back to is: how authentic is the demand?
At the earliest stages, there is rarely enough data to remove judgment from the equation. I can believe in a team before its market is established. But the demand signals that the team receives soon become product decisions. A founder may focus on one industry because several prospective customers responded enthusiastically, hire people with experience in that market or spend months adapting the product to a corporation's systems. The startup is committing money and engineering time while the prospective customer may still be exploring an idea.
The enthusiasm in that first meeting can be entirely sincere. An innovation team may have a budget to test promising technologies, while the people who would use the product have other priorities. For a founder, the useful next step is to bring those people into the conversation. How is the operating team handling the problem today? What does it cost to leave it unresolved? What would have to improve for them to change the way they work? Asking for examples from their daily operations helps a founder understand the problem's priority and may change what the startup decides to build.
Before committing to a pilot, the founder and the customer should be able to describe the decision its results will inform. That means agreeing on a business outcome, who will evaluate it and what would follow a successful trial. If the trial works, who can approve and fund deployment, and what further integration work would be required? Payment for the pilot may cover only the experiment. Where the path to deployment remains unclear, founders can limit the scope and engineering effort of the initial test, and agree with the customer when to review what they have learned before committing to further development.
Consider a factory evaluating a new inspection tool. The engineering team may be impressed by its ability to detect defects. The plant manager needs to know whether it can reduce rework without slowing the line. A technically successful trial could still leave that question unanswered if it avoids the conditions the tool will face in production. Testing against those conditions, with the people responsible for the line, helps establish whether the improvement is worth the cost of installing and operating it.
For a young company, an experienced industry partner can make that process more productive. Familiarity with a customer's operations helps the team identify which constraints it must address first and which can be resolved as the product develops. A continuing relationship also gives both sides room to discuss shortcomings, adjust the trial and return with a better solution. The customer contributes knowledge that the startup would otherwise have to discover through costly trial and error.
Sometimes the most useful customer meeting is the one that sends a company in a different direction. Conversations with the operating team may reveal that a less prominent feature solves the problem they would pay to fix. Repeated feedback may point toward another industry, or suggest that the startup should change how the product is delivered. For founders, discovering this early preserves room to adapt. Waiting until a roadmap and a team have been built around the original assumption makes that adjustment much harder.
For me, backing a team includes helping it make sense of what comes back from the market. That means examining the assumptions behind the investment alongside the founders, drawing on industry experience to interpret the feedback and helping them reach other potential buyers. When the evidence points to a different application, the next step is to work out what the team should test and how much time and capital that test deserves.
Those conversations also help establish whether the business can grow beyond its first customer. A heavily customized project may produce revenue without establishing a repeatable business. Before turning one customer's request into a major product commitment, founders can bring the underlying problem to other prospective buyers: How do they handle it, and would solving it justify a purchase? The answers help distinguish a requirement worth building into the core product from work that serves a single account.
The purpose of validation is not to prove that the market agrees with you. It is to discover, early enough, where it does not.
Omer Shachar is Managing Partner at Next Gear Ventures and Founding Partner at Drive TLV.
