How Startups Land Their FIRST Customer | a16z Speedrun Playbook

Everyone tells you traction is critical, but no one tells you exactly how to get it. How do you prove the product you are making is one that not only will be useful, but one that customers are willing to pay for? In this video, I'll show you how to land that critical first customer. Structure the deal so it scales and packaged the traction so investors lean in. You are looking for deals that generate evidence, logos, dollars, and especially repeatability. That's what investors call traction. And guess what? Speedrun founders who had traction by demo were over six times more likely to raise additional funding. I'm Macy Mills and I lead business development for a 16Z speedrun. Every week I get to help founders think through closing their very first customers and design partners. We've distilled what actually works into this video based on hard won lessons from hundreds of SpeedRun startups. Step one in landing your first deal is customer discovery. And here's the good news. You don't need a working product to start. You don't even need a demo. What you need is a hypothesis of a problem that you're solving, a clear idea of who your ideal customer is or your icp, as well as a list of warm contacts who might fit that profile and the sheer will to go find more of them. For warm leads, we call them friendlies. They're people you know, or perhaps even friends of friends who will take your call, give honest feedback and help you test your thinking without needing a polished pitch. In an ideal world, you have a dozen dozen or so friendlies you can start with. Start with them and ask them for intros to others. The more you can lean into warm leads, the better. In terms of numbers. You should aim for 5 to 10 customer discovery calls in any given week to test the product hypothesis that you have. But I also know it may be unrealistic to have that many friendlies. And this is where the brute force comes in. You need to be out there writing people on LinkedIn to try to get to as many conversations as you can in these calls. Don't start with features or product ideas. Start with problems. Your job is to dig into their pain and understand how they think about solving it. Ask questions like what's the most painful part of your day? How are you solving that? What's missing from the solutions that you've tried? And if I could save you 10 hours a week on that, what would it be worth? That last one, the pricing question is powerful. You may not get to a number right away, and that's okay. It might come in a Follow up call. But when someone starts thinking in terms of budgets, you've moved from research into potential partnership. These conversations help you do two things at once. First, they give you clarity on who your ICP really is. Second, they help you spot who might be excited enough to become an early design partner. So now you've started to identify your ICP and maybe even some excited prospects. Let's talk about what makes someone a great design partner and how to spot the ones that are going to be most useful for your product roadmap. First, what even is a design partner? A design partner is a crucial early customer that will try your product, give you feedback, and will likely have sway on your product roadmap. Some people also call them lighthouse customers. All fancy ways to say your first external partner. They can be paid or unpaid, and we'll discuss that more later. Most of the time they are at least heavily discounted, and it's crucial you pick partners you want to work with as well as those that fit your icp. Here are a few principles I share with founders in Speedrun when they're choosing their early design partners. First, run two to three design partnerships in parallel. You'll learn more faster and you avoid anchoring your roadmap around the needs of just one customer. Second, choose partners who match your icp. If you build with someone who's not a fit long term, you risk creating custom solutions that you'll never scale. You should also make sure the design partner's needs fits the needs of your first features that you're developing. For example, I once had a founder who was building a product primarily for PC. They had a lot of early potential customers that were interested in PC, but one really exciting customer that wanted mobile. They discussed as a founding team potentially moving mobile up in their roadmap. However, they had already talked to many PC design partners that were interested in getting their hands on the PC product. They ultimately decided to pause and add mobile at a later date, at which point that customer became their first mobile design partner. This is a great example of them showing discipline and their product roadmap while being able to still close that mobile customer at a later date as a design partner. Third, take everything those first customers say with a grain of salt. Design partners are helpful, but there's still just one or two voices. Don't let a single opinion rewrite your entire product strategy. It's actually quite common. Some people call it the blue chip customer feedback trap. At the building stage, you need to ensure you have strong conviction on your product roadmap. Before going into customer feedback meetings. This will allow you to stay strong on your strategy and ensure that those one to two customer conversations aren't completely changing your product roadmap. And finally, be careful with how you structure the deal. A deeply discounted or even free deal is fine for your first deal, but if it auto renews at the same price later on, it could hurt you in the long term. A better approach is a short term pilot. Think three to six months. At this point in time you're probably still figuring out your pricing model as well as the value that you can add. So in this case it's better to have a short term contract where you work on the design partnership. They give you feedback on your roadmap so that at a later stage you can upsell them into a regular customer contract. So how do you know when you're ready to charge that first customer and when does it make sense to hold off? That's what we'll be getting into in the next section. One of the biggest questions I get from founders is when should I start charging money? Some people will tell you to start on day one because this shows intent that the customer truly cares enough about the problem that they'll be willing to put money on the table. Others say, just get logos on your traction slide. Don't worry about revenue right now. The truth is, like most things in early stage startups, it's more nuanced than that. It depends on how fast you can deliver value to your user. In the very early days. I'm actually a fan for not asking for money, but asking for letters of intent. We'll talk a little bit more about this in the next section. In general, there is more than revenue to these design partnerships. If you're working with the right partner, someone who will give you logo rights, feedback, a quote, maybe even a case study, then whether they pay you right now might not be the most important part. Here's my general rule of thumb. If it's an enterprise deal, you should be planning to charge more than a total of $10,000. For under $10,000, it's going to take you a long time to get through legal compliance procurement. You might even spend more money than that when it comes to legal fees. Also, it's important to mention that at an enterprise level, $10,000 isn't even that much money, so it doesn't necessarily show intent. I once had a founder spend over six months closing a deal where they were charging $1,000 a month. Was I happy when they finally got the deal closed? Hell yeah. Did I think it was worth it? Not really. Without charging that $1,000 a month, they probably could have gotten that valuable customer feedback even sooner. Sure, it was a big company, so they'd probably have to go through compliance and jump through some hoops, but I still think the deal would have been quicker and they could have gotten back to building. So I'm here to tell you that in my opinion, the first deals don't necessarily need to be revenue generating. Focus on what is going to drive the most value for you in the short and long term, whether that's revenue, logo rights, case studies, or product feedback. Now let's talk about the various ways you can close these deals and show traction to potential investors. I like to think of traction as a step ladder, a framework of progress that you can show your potential investors at the earliest stages of your company. You may be on level one, which is completely fine. Once you get to level four Traction, that's when investors really can't stop paying attention to you. So let's break down the levels of traction. As I see it. Level 1 Pipeline these are logos of people who have expressed interest either on a call or by signing up to your product online. This is definitely the softest form of traction, but some founders need to use it in the early days to prove that there are people who are interested in their product at a very early stage. Level 2 design partners signed Lois with Potential Design Partners Lois or Letters of Intent are non binding contracts that share your intent to partner. They should outline things like how often do you want feedback from the partner? What products will you give to the partner, if any? Sometimes it makes sense to get these done in advance of an official paid contract, especially if you have a crucial event like a demo day coming up. Getting customers to sign Lois is easier than signing contracts, but they still still do take time to get through the legal process. So take that into account as you are planning for something like a demo day. Pilots Paid Pilot Contracts this is more official than a signed loi. This is most likely where you've decided that you have enough of a product that you could start to charge customers. I like to give the guidance of three to six months for a pilot period. This is great traction once you go from one pilot to a few pilots. Level 4 annual revenue an Annual subscription paid contract. This is the gold standard. An annual paid contract at a rate you feel properly compensates you for the product that you're building. As I mentioned, there are four different levels and ways to package up your traction for investors okay, let's quickly summarize everything that we've looked at and how to start thinking about your next steps when it comes to landing your first deal. Tip 1. Define your ICP through real customer discovery. The right early conversations give you clarity and signal. Many Speedrun founders pivot multiple times during our 12 week program. We actually love that because it shows that they're listening to their customers and making real changes. Identify the right design partners. Not just anyone who's interested, but people who fit your ICP and help shape your product without derailing it. Tip number three, there's no universal rule on when to start charging money. But remember, deals create leverage in other ways than money. Whether that's through logos, feedback, or marketing collateral that can sometimes be worth more than that early cash. Tip number four, Package up early traction for investors by thinking about what level you are realistically at. Whether that's pipeline design, partnerships, pilots or revenue, AKA paying customers. Remember, your first deal sets the tone. It's about learning fast and building a foundation that can scale. But don't worry, you have plenty of time to pivot if you get this one wrong. If you're already on your way to landing your first real deal and wondering what to charge when that first real customer says yes, check out my other video on the complete playbook. On B2B pricing, I break down exactly how top founders think about value, anchoring and clarity. Closing the right pricing strategy for early stage sales. Whether it's a free design partnership or a six figure contract, the goal is the same. Prove value, stay focused, and use every deal to sharpen what you're building. Now go land your first customer. I can't wait to hear all about it. Great. I still get bloopers. Do I look ready? Born ready. I really should be a news anchor. Sorry. I really think I could do this. Boom. And here's the good news. My hair stuck on my lip. Sorry. Should I do Salt Bae when I say that Salt Bae canceled. I had his thing in Fortnite, like in 2017. So at a later stage, you can look at them. You can look at them. What are we looking at? Look at me smiling at the end of my sentences. Murad taught me so much. Sorry. They're staring at us, so I got nervous. Okay, okay. He's just watching. Yay. Perfect.