Shanaz Hemmati, two veterans at a multi-billion dollar startup, says future entrepreneurs need to remember one important lesson before starting a new business.
No matter how confident you are with your business idea, she says, you can look for as many prospects or clients as possible to get their feedback before you commit to your business model.
Hemmati and Ross Buhrdorf are co-founders of Zenbusiness, creating artificial intelligence software aimed at helping first-time entrepreneurs navigate the regulatory process of launching small businesses. They launched the business in 2017 and were recently valued at $1.7 billion in November 2021.
The pair previously worked as executives at Homeaway, a vacation rental marketplace, but Expedia acquired it in 2015 for $3.9 billion.
When they teamed up to launch Zenbusiness, they spent about 10 months researching the industry and talking to dozens of entrepreneurs and dozens of entrepreneurs about the biggest issues with legal compliance, says Hemmati.
“When you have an idea, you’re already identifying the problem you want to solve,” she says. The next step is to come up with a way to solve it, she says, but you shouldn’t jump to that stage too quickly.
Learn about customer needs by “constantly interviewing”
Hemmati says she and Buhrdorf wanted to build software powered by AI to help small businesses manage and submit legal documents. They have already witnessed the issue firsthand as they work at startups and have also found public data showing it is a widespread obstacle for entrepreneurs across the country, Hematy added.
They initially planned to market services only to existing businesses, but talking to prospects made them realize they should target first-time business owners who have never navigated a “pretty complicated” legal process before, she says.
“We spoke with about 50-100 prospects and understood everything from formations to ongoing compliance and growth services to understand what they needed most,” she says. “We ran a design sprint, tested various packages and pricing, built a website, and refunded early signups just to see what caught the attention of people and what they paid.”
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The strategy proved invaluable and gave Hemmati and Buhrdorf “incredible insights and launch confidence.”
And by working with these business owners from the start, these clients are likely to continue using Zenbusiness software as the company grows, Hemmati said. According to the company, Zenbusiness is currently working with at least 850,000 small businesses.
Takeaways for other future entrepreneurs, she said: Any business idea needs to be properly examined, and the first step is always to study your market and talk to clients and clients who want to reach your business.
“(Starts) from doing that communication and collaboration, constantly interviewing potential customers, learning about the next product they are interested in and how to build it,” says Hematy.
“If you can’t pivot… you could fail.”
Steve Blank, an author and serial entrepreneur who teaches courses on Stanford subjects, similarly states that failing to properly investigate potential clients before building a business model is a “fatal mistake.”
“The most important (question) is, “Well, who is my client?” The second is, “What do they want?” “Not: “What I’m building is here. Can I sell to someone?”
But looking for that feedback is important, but it can actually help only entrepreneurs who are open to a new perspective and willing to adapt.
“If you can’t pivot or pivot quickly, you can fail,” Blank wrote in a 2010 blog post.
Hemmati agrees: “There’s a huge difference between people who have an accurate way of thinking about what they want to do (something) and people who are really open-minded (their choices),” she says, adding that ultimately that way of thinking can be the difference between success and failure.
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