We are one month into the development process of our new product and we still don’t have the User Persona locked in. This is making me anxious, my co-founder anxious and the whole advisor board.

I have been working on an automated sales engine for the past 15 months. Throughout this journey, we've repositioned multiple times and have now arrived at a use case of following up on mid-funnel deals.

Anyone who has worked in sales would vouch for that: following up is a pain in the ass. Deals slip through the cracks. So, I know the use case we are working on is valid. We did 40-odd customer discovery calls to validate it.

But here's the challenge: our use case is very universal to sales teams, with a large Total Addressable Market (TAM). Yay! But where do we start? Which market can we pick that allows us to validate our solution and prove there is market pull?

My personal mantra is: The number 1 job of the founder is picking the right market, right team, and right product—in that order.

In this post, I want to outline my thinking about picking the right market for Aristotle.

Why a Demand-Focused Approach is Important

How founders try to find product market fit has evolved over time.

“Build it and they will come” - The idea that if you build the product, customers will be making a line in front of the door. This is what majority of sillicon valley was doing.
“Fake it till you make it” - Make real looking landing pages of the offer and test demand. Eg:- Buffer pioneered this approach.
“Build the best product” - A relatively new ideology that is coming up where most users are already exposed to software products and building a high-quality product is more important. Linear has written a blog about this topic on how to build a competitive product for today’s market.

All these approaches look at the problem from a product-first approach without thinking about demand.

Before diving in, let’s look at a few successful companies that started with a demand-focused strategy:

Amazon: The Choice of Books as the Initial Market

When Jeff Bezos founded Amazon, he didn't start by selling everything. Instead, he identified books as a product with high demand but limited distribution. Books were easy to package, store, and ship, making them an ideal entry point into e-commerce. This focused approach enabled Amazon to build a loyal customer base and perfect its business model before expanding to other categories.

Apple: The Focus on the Music Market with the iPod and iTunes

Apple's entry into the music market with the iPod and iTunes was another masterstroke in demand-focused strategy. At the time, there was a clear demand for a better way to buy, organize, and listen to music. Apple addressed this pain point by creating a seamless ecosystem that transformed the music industry and paved the way for its success in other product lines.

Nike: The Strategy of Focusing on Athletic Shoes

Nike's initial focus on athletic shoes allowed the company to become a leader in a specific niche. By understanding and catering to the needs of athletes, Nike was able to build a strong brand and later expand its product offerings to include apparel and other sports-related items.

These examples highlight the importance of starting with a specific demand and addressing it effectively. Now, let's dive into how you can apply this demand-focused approach to your own product.

Understanding Demand-Focused Entrepreneurship

As a founder, your primary job is to pick the right market. This is in contrast to the typical supply-focused approach, where the founder builds the product and thinks that you can hire to find customers.

The demand-focused approach involves identifying problems first and then building solutions. While this sounds easy in principle, it's very challenging in execution.

The Demand-Focused Approach

Step-by-Step Guide:

Identify Problems First: Start by pinpointing the core problem you aim to solve.
Find the Customer Segment: Determine which customer segment faces this problem most acutely.
Evaluate Customers: Identify the most valuable and desperate customer segments.

Key Questions to Ask:

How much does the customer spend on solving this problem currently?
Can the customer immediately comprehend the value of your solution?
How long does it take for the customer to see value?
What is a less valuable problem compared to this? What is a more valuable problem?
What alternative solutions exist to solve this problem? Why not invest in those solutions?

One of a Kind and Perfect Fit

Before I go further, I want to explain the concept of one of a kind and perfect fit from Diego De Jodar.

When your product is one of a kind, the buyer identifies is as very unique among the competition. In our case - we focus on ‘Following Up to win and never having deals fall through the cracks’.

Perfect fit is when the buyer feels like the product is built just for them. This association could be made in multiple ways:- Small sales teams, Field Sales Reps, Real Estate brokers, 10x sellers.

One of the goals of our exercise is to identify how you navigate yourself to One of a Kind and Perfect fit.

Practical Example: Applying the Approach to Aristotle

I will share the practical steps I have taken to identify and validate the right market for Aristotle, using my trusted friend, ChatGPT.

Initial Exploration

First, I ran an exploration prompt to get the lay of the land:

I have a product with the following use case: [usecase] 

Based on this use case, please identify and list the key characteristics of the ideal beachhead market for this product. Consider factors such as:
- Industry verticals where this use case is most relevant.
- Typical customer profile (company size, revenue, decision-makers).
- Common pain points or problems that this product addresses and it's the biggest problem the decision makers have.
- Existing solutions and their limitations.
- Typical budget size for solutions that address similar problems.
- Preferred methods of purchase and implementation (e.g., subscription, one-time payment).
- Sales cycle length and customer journey stages.
- Key success metrics or KPIs that customers would use to evaluate this product's effectiveness.
- How likely are they to trust a startup?
Please provide a detailed analysis of these characteristics.

This prompt gave me an output to further explore.

Industry Verticals:

Software/SaaS
Financial Services
Marketing & Advertising
Healthcare & Medical Devices
Real Estate
Professional Services

Typical Customer Profile:

Company Size: Mid-market (100-500 employees) to large enterprises (500+ employees)
Revenue: Companies with $10 million to $500 million in annual revenue
Decision-makers: Chief Revenue Officers (CROs), Sales Directors/VPs, Sales Managers, Heads of Business Development

Common Pain Points/Problems Addressed:

Lead Stagnation: Deals getting stuck and not advancing to close
Poor Follow-Up: Sales teams not systematically or effectively following up with potential clients
Inefficient Sales Processes: Lack of integration and visibility in sales processes
Forecast Inaccuracies: Difficulty in predicting sales outcomes
Customer Engagement: Struggling to keep leads engaged and interested

Existing Solutions and Their Limitations:

CRMs (Salesforce, HubSpot): Robust but often lack specialized follow-up automation
Email Marketing Tools (Mailchimp, Constant Contact): Good for nurturing but not tailored specifically to mid-funnel sales
Point Solutions (Outreach, SalesLoft): Offer automation but can be expensive and complicated to integrate

Typical Budget Size:

Mid-market Companies: $10,000 to $50,000 annually
Large Enterprises: $50,000 to $200,000+ annually

Preferred Methods of Purchase and Implementation:

Subscription-based SaaS: Preferred for flexibility, lower initial investment
Annual Contracts: Preferred for better pricing and long-term commitment
Implementation Support: Desired for robust customer support, training, and onboarding

Sales Cycle Length and Customer Journey Stages:

Sales Cycle Length: Typically 3 to 6 months
Customer Journey Stages: Awareness, Consideration, Decision, Purchase, Implementation, Optimization

Key Success Metrics/KPIs for Evaluation:

Increase in Conversion Rates
Time to Close
Deal Progression Rate
Sales Rep Productivity
Customer Engagement
ROI

Trust in Startups:

Mid-market companies: More open to cost savings and differentiation from startups
Large enterprises: Cautious but open with strong case studies and pilot success

Narrowing Down

Next, I pick the industry categories.

Software/SaaS - Highly competitive. Everyone is fighting for this market. Oversold.
Financial Services - High compliance requirement. Since our product is for B2B sales, there would be less deals (aka relationships) to manage per seller (in this case could be a banker)
Marketing & Advertising - Ideal market.
Healthcare & Medical Devices - High compliance requirements.
Real Estate - This would be commercial real estate. There is a one-of-a-kinda competitor for our product in this space (Follow up Boss).
Professional Services - Ideal market.

I then ran a follow-up prompt to niche down further. The idea is here is to find even smaller groups of customers:

From above beachhead markets - broader categories of - [Marketing & Advertising], [Professional Services] is interesting. 

Based on the previously identified characteristics of the beachhead market, let's explore potential niche customer segments in each broader category. Be niched as possible. Represent in a table.

Below is a table outlining potential niche customer segments within the broader categories of Marketing & Advertising and Professional Services:

In-Depth Analysis of the Sub niche

To get a more detailed understanding, I used another prompt.

For each of the beachhead market characteristics provided, please perform the following tasks:
- Identify specific industries or sectors that align with these characteristics.
- Describe typical companies or organizations within these sectors.
- Identify the primary decision-makers or buyer personas and their roles.
- List the major pain points these potential customers face that align with the product's use case.
- Outline the current solutions they might be using and the gaps or limitations in these solutions.
- Estimate the potential ROI or value proposition this product can offer.
- Suggest effective marketing and sales strategies to engage with these potential customers.
Please provide a comprehensive analysis for each identified segment, including potential challenges and opportunities in a table.

Here’s a summary of the comprehensive analysis:

Validating the Market

Once you have identified a set of potential beachhead markets, the next crucial step is validation. Here's how to approach it:

Initial Outreach

Cold Messaging: Reach out to decision-makers within your identified niches through LinkedIn. This approach helps gauge initial interest and gather feedback on your value proposition. Don’t reach out to sell. In your initial message, make sure that you start the relationship to connect.

If the target persona isn’t active much on LinkedIn, you have to find out what’s the most trusted option of reaching them. It could be attending in person events, identifying communities where the persona hangs out.

Pilot Programs

Offer Paid Pilots to a select group of companies within each identified segment. Monitor usage and gather data on the effectiveness of your solution. It’s really important to make them paid customers even for a token amount or otherwise you’d have skewed data.
Case Studies: Develop case studies from your pilot programs to capture success stories. These can serve as valuable testimonials and proof points for future sales efforts.

Metrics & Evaluation

Track Key Metrics: Measure the success of your initial outreach and pilots using the key success metrics and KPIs identified earlier, such as for my product Aristotle:
- Increase in conversion rates
- Reduction in time to close
- Improvement in deal progression rates
- Sales rep productivity
- Customer engagement levels
- ROI from the solution
Iterate Based on Feedback: Use the insights gathered to refine your persona and messaging. The goal here is to find a position for your product where you are a one of a kind and perfect fit.

Scaling Up

Refined Targeting: With validated segments, focus your marketing and sales efforts on the most receptive and high-value niches. Double down.
Strategic Partnerships: Setup partnerships with organizations that directly connects to your doubled down niche. This would increase the trust your buyer has on you and also provide a constant customer acquisition channel as partners are already in touch with your buyer for other activities.