Venture Capitalist at Theory

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2 minute read / Dec 7, 2012 /

The one ideal characteristic of your startup’s first customers

Over lunch last week, a good friend who is an entrepreneur and I were brainstorming about the features of his optimal initial target market. His product hasn’t yet launched so he still had some decisions to make about which users and use cases to target. We wondered if there were a rule of thumb about initial target customer segments.

We took out a blank sheet of paper and came up with this:

Ideal Customer = max (DAU / MAU)

Rapid iteration from informed feedback

The best first customers are the most active customers - the ones who will use your product on a daily basis - or as close to a daily basis as possible. Active customers provide three key pieces of feedback:

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First, their activity rate proves the product solves their need. In other words, these users validate product/market fit.

Second, these power users can readily articulate the product’s shortcomings and because they use the product on a daily basis, this feedback is fast and frequent. This enables the product team to make small daily course changes to fine-tune the product and inform the longer term product roadmap.

Third, active users are the best to test pricing because they understand the value of the product since it solves their need. It’s simple for them to express their willingness to pay.

The second most important characteristic

Ideally, this highly active user base also is part of a tightly knit community, one in which word spreads quickly. Active users tend also to be the most vocal users and the biggest proponents of a product.

I don’t always build product, but when I do I pick my customer segments

Fast feedback cycles are fundamental to great product development. The best users use the product with maximum frequency, generate usage data for analysis and also provide product feedback to drive the product toward product market fit faster. When choosing your initial target customer segment, focus on daily users.

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