How to do customer screening the right way

Photo credit: Toa Heftiba.

Yoav is a star contributor for Tech in Asia and publishes exclusive, high-value content that serves the Asian tech community. Read more from star contributors here.

As an outside consultant to the startup ecosystem, I frequently work with investing entities on their deal flow, screening, and due diligence process.

There are as many different styles and approaches as there are VC firms, and each person has different aspects that they emphasize. Some focus on people, others on technology, and others on the business. Over time, I’ve been exposed to numerous methodologies and have developed my own as well.

One thing I learned is that you can often get more relevant information from a startup’s customers than in any pitch deck or presentation. But customer screening is frequently overlooked and often not properly done.

The typical approach of an investor is to ask customers a laundry list of questions like:

• Are you happy with the product?
• How long have you been a customer?
• Why did you choose this product?

These are good questions—especially the third—but I prefer a deeper approach.

Building a customer story

Try instead to build a story from beginning to end with open-ended questions.

Let’s say you’re screening customers for a B2B startup. Start with how the startup’s customer (a company, in this example) recognized there was a problem. What was the best existing alternative solution/process to solving that problem before the startup came along?

Then, work your way through the following:

• How/why the company chose the product
• How they integrated it
• If they have implemented it fully today
• Who is using it now
• If they are satisfied
• How/why usage has changed over time
• What they’d want from the product in the future (aka what isn’t working well now)

I typically spend 30 to 60 minutes per call in this process, and always over the phone. Be extremely respectful of the customer’s time and completely transparent. I begin the call saying, “X is considering investing in Y. I would love to have you walk me through your history with Y and when you first realized you wanted a solution.”

By building a full story, the customer can give you insights hidden between the lines of the pitch deck, clue you into additional potential benefits of the product, or bring to light the flaws and issues that otherwise would have been overlooked.

Weighing a customer’s value