Building a great product that everyone loves, but no one wants to buy.

Most people in the start-up world, or basically anyone who has ever dreamed of being an entrepreneur, must have heard that “making something people want” is the secret to being a successful entrepreneur. This slogan, or a variant of it, is Y Combinator’s motto. Some of us have come to learn from experience that “making something people want” isn’t quite enough to achieve success in business. If you take the time to go through YC’s startup school curriculum or watch their videos on YouTube, you’d realize that they know it’s not that simple. I would propose that the complete sentence should be “make something that people want, that solves a big problem, and that people are willing to pay for it”

The first “phase” of our current start-up was not quite successful, not because we didn’t build a great product or there wasn’t a market need, but because customers were not willing to discontinue what they were using and take the risk of purchasing our solution. They loved our product, they wanted the product, but they were unwilling to rock the boat. It was a very painful experience, but I am somewhat happy that we learned from it; I just wish that we didn’t spend so much money to learn those lessons ?.

Our initial idea and hypothesis

Most banks offer their customers different electronic/digital banking channels – mobile banking, internet banking, text banking, voice banking, etc.  One of the challenges that customers face is that for most banks, the credentials required to use each channel are different, and customer preferences (e.g. saved billers, transfers beneficiaries, etc.) configured on one channel are not available on other channels, thereby making the overall customer experience inconsistent across the bank’s channels. For some banks, this was because different service providers for the disparate channels or different departments in the bank were responsible for the different channels.

eBanqo set out to solve this problem by building “Nexus360” – a platform that handled customer authentication, preference, and settings, transaction history, among others. With one set of integrations to the banks’ core platforms, all customer channels connected to Nexus360 provide customers with a consistent experience with their preferences and data in sync irrespective of the customer’s channel. The vision was to make it possible for customers to transact easier on any channel of their choice.

“Searching” for Market Fit

Based on the founders’ experience and following an extensive customer discovery process, we were certain that there was a market need.

Our value proposition was an omni-channel product that provides: (i) consistent customer experience across all channels, (ii) centralized repository of customer preferences, (iii) Settlement, reconciliation, and reporting from a single source, and (iv) single and secure integration to the backend systems.

We spent several months building the platform, then came the moment of truth – selling the product. We went back to several of the bankers that we had spoken with, and presented the solution we had built – they were genuinely excited. They were quick to set up meetings with a wider audience in their banks to see a demo of our product. The excitement in the demos was always palpable. As a team, we kept congratulating ourselves for having built a great product, but the enthusiasm from the banks didn’t turn into closed sales, just deafening silence for weeks/months after multiple demos despite continuous follow-ups. This happened with prospects in Canada, the UK, the US, and several countries in Africa. What could the problem be? Why couldn’t we record a sale?

We then tried to offer free proof-of-concept (something that I had always advised other entrepreneurs against), and it was still quite difficult to get prospects to accept “FREE POC”. We still didn’t understand why. We finally got a small bank to agree for a FREE POC – we finished deployment in about 6-weeks, and we were getting excited again. After about 7 weeks of “internal testing”, the client informed us that they were not going to be able to migrate to live for customers to use it, and they couldn’t give us any concrete reasons.

There were over 10,000 banks in our target countries, and we couldn’t get a single client eight months after the product launch. We felt utterly lost!

The painful moment of truth – actually hearing from “the market”

The turning point for us was at a fintech/banking exhibition in Atlanta where we had a stand. Our stand had a screen, running several ads of the product features, flyers about the product, and cue cards that visitors could pick up which nudged them to try any of our channels. I had discussions with several visitors to our stand, and I still saw the now-familiar enthusiasm from bankers and bank customers about the product. But…there are 2 conversations that I can never forget. The first conversation was with a fintech entrepreneur – her words were something like “I think you guys have built too much. It looks like a great product, but did you guys really test an MVP with clients to be sure that it met their needs?”. The second conversation was with the Head of IT of a Community Bank – he told me, quite bluntly that “We have been using our internet banking provider, who also provides our core banking platform, for over 13 years; and our mobile banking provider for about 7 years. I don’t think that I’d have the boldness to tell my management that we should discontinue using 2 established vendors and switch to a single platform provided by a new start-up“. I left the 2-day exhibition seeing very clearly how difficult it would have been for all the banks to whom we had been presenting, to replace 2-5 existing vendors with an “untested startup”. It was evident that we didn’t have the market-fit that we had assumed we had.

Key learnings

The lean-startup methodology strongly recommends building an MVP (minimum viable product) and testing it with customers to be sure it’s what they need. This makes sense, but I think it’s not always going to be possible – particularly if you’re into hardware, a highly regulated industry, or if you’re coming into a highly competitive industry.

In our case, we spent a lot of money and time trying to build a complete near-perfect product, and never tested it in the real world until it was too late. Something that I’ve heard from several speakers, especially from YC, is “fail fast” – another variant that I’ve heard is “start small, scale fast”. It’s certainly better to start small and fail quickly than to fail after 13+ months of design/development work and almost $1m has been spent.

During our customer discovery discussions with prospects, it appears that we got answers to questions “validating the problem” and “describing the ideal solution”, but we didn’t quite have answers to the “size of the pain from the status quo”, their “willingness to try” and “willingness to pay” for the ideal solution.

So it’s really not just about building a great product, it’s also about ensuring that the problem is big enough for the clientele and that they would be willing to take the plunge of trying or paying for a new solution.

The next time you wonder why our “messaging” start-up is called eBanqo, hopefully,  the story above explains our “great pivot”. Sometime in the next week or so, I’d write the second part of this unfolding story – how we pivoted to omni-channel customer engagement platform, and how the journey is going.

Note:

This article mentions Y Combinator quite a lot, and I didn’t get their permission – please forgive me. For everyone else, please note that Charles is not a spokesperson or representative of YC in any way! 

You can read the follow-up article here.