1205: Tekyz: Craft the Perfect Launch Strategy for Software Development and SaaS with Founder and CEO David Hirschfeld

Robert Plank 0:04 Hey, welcome back to the podcast. David Hirschfeld is here from tekyz. That's T, E, K, Y, Z.com, and David has seen some things. He's seen some things happen in the startup world, in the software world, and he is going to share with us. That's common trait that's shared by companies that are successful, and it's missing from the companies that failed. He has something called the launch first method, but he also just has some guidance in general for software companies, SaaS, companies, startups who want to have a greater chance of success, to navigate all the strategic steps and moves that need to be taken. So David, glad to be speaking with you.

David Hirschfeld 0:45 Yeah, thank you, Robert for having me on the show. And I love talking about the startups, even though sometimes it's a very sad story, but there's hope, and that's if you just sort of flip your perspective a little bit, then all of a sudden you can turn it into something that really makes sense, and you can build a business around it.

Robert Plank 1:05 And that's exciting, right? I mean, it is sad when the there's always their risk of failure, but if you can pivot, if you can adjust, if you can do things in the right way, that's where you want to be at and so what is your I mean, as far as what you've learned and what you're passionate about, talking about what's currently on your mind.

David Hirschfeld 1:22 Okay, so I've worked I started techie 17 years ago, and I've been in the software world for over 30 years, and I had my own startup in the logistics, Route, distribution, inventory management, and grew that to 800 customers in 22 countries, and ended up selling it to a publicly traded firm. So I have that experience of having a successful exit. I understand what that whole life cycle is like. That was an eight year journey for me and a partner, and we built up a company, we sold it, and then what I realized is what I thought made it successful was not, were not the things that made it successful. And it took me working with lots of other startups and watching them fail in in the manner of tekyz being the tech team and the software development company for these startups, that made me start to realize what the common patterns are between these companies that fail versus the very few that are successful. And it's always, it's almost always the same thing. It's that they lack product market fit. They're building something they believe the market wants and they believe customers will buy, and then they invest hundreds of 1000s or even millions of dollars into this product over several years, and nobody's buying. They just don't have a they either don't know how to speak to the market, you know, message their product in a way that people will go, ah, that's what I need. That solves my problem, or they just don't have product made. It's the wrong product for the market they're trying to sell to. And so, and the reason they don't have product market fit and that, and they don't realize it is until they've spent all this money and made this huge personal investment, is because they wait way too long to try to sell their product. So because the only way you know you have product market fit is somebody's writing you a check for your product or paying a monthly subscription, or, you know, the fact that they download it for trials. Unless you're some massive social network, then that's doesn't mean anything related to product market fit, because they may not pay for it once you decide you're going to turn on the pricing engine. So so what we did was we came up with this methodology called Launch first. The idea is launch the business and launch your marketing and sales engine before you build the product. Right? It makes no sense, right? It sounds like it's backwards. How do you do that? But actually, you can do that. You just need some kind of a prototype that looks like the product that you're intending to build, and it behaves like the product you're tending to build, so that when you show somebody, they get the vision. It's not just design mock ups that you can click through, but it's more than that. It's not an MVP, which is not because MVPs are too small in terms of your vision and functionality for people to buy into it. It's the vision, but it's not real software, but it looks like it's real software or or, in the case of like cars, Elon Musk did this with the Roadster. When he came up with a prototype roadster that didn't go anywhere, it couldn't drive, but it looked like a real roadster, and it was going to be this fab, fabulous electric car. He pre sold lots of them, and so there was no question he had a product market fit, and he knew how to position it in front of developers. And he used that money to both fund the the develop the development of his cars, and also prove to investors that he has traction and that people want this. And so he could raise money. So what we do is we create that prototype, we go out, we go through this very. Exhaustive niche analysis process to find that or who's that one early adopter niche, and what's the top maybe two or three problems that you're going to be solving for them with your product? And we don't want two niches, and we want to know all the niches, but we need to figure out which of all those niches is the one that's going to make you successful in the very early days, then we build a marketing stack and build the messaging and go out to those individuals and do individual demos to them, or we do webinars, whatever the right way to reach that particular target audience. And if the value that you're offering is high enough, it has to be pretty high value, because you don't have your product yet, then it's and that might be a lifetime license, if they pay for 18 months of the subscription fee in advance, or in the case of like, clinical trial software, which we've done pre launch sales for really expensive clinical trial, medical clinical trial software for $250,000 a pop for a, say, a pre launch purchase, there was free implementation, because usually the implementation cost for setting up clinical trial software is more than the cost of the software, or whatever that high value offer you're making, if the value is high enough and the cost to them because of the problem you're solving is big enough and their perception of that problem is significant enough that they really feel they need it. They need that problem solved, they will buy, and they'll buy in enough numbers before you even have a product to prove that you've got product market fit. And we set that line at three to one ratio, three to one in terms of lifetime value of a customer over cost of what your cost of acquisition to acquire that customer. And you have to, and you've sold enough of these. So you know, it's not a it wasn't a fluke, one or two sales, and then we keep selling. Why not? Now we've got a marketing and sales engine running. That's why we call it launch. First you've launched your your business before you actually built the product, and we start the development. Tell people that the first version won't have all these features. It'll be there in two or three months, or four months, depending on what that first version needs to look like, and you just use that money to fund development, and you now, if you want to raise money, you have a very different position when you're talking to investors, because you're showing revenue and traction, and you don't even have a product yet. So this is what launch first is about

Robert Plank 7:36 very nice. And I like a lot of what's in here, because you're giving me flashbacks to all these like points in life when, like, I made a software like that, once or twice I sent in, like, the book proposal before the book was ready. There's all these times when you sort of, it seems a little like, like, risky and out of order, but then the way you laid it out, like, it makes a lot of sense, because the it seems like the the wrong, like the kind of counterintuitively wrong way of going about it, right? People, they make the product, they make the features, and then they go and try to figure out the people later. They try to figure out the marketing later, and then the products way over here, and the person's way over there. And so I like your way of doing this, because you you start the sales first, you talk to people, first, you beat up the idea, first, you figure out marketing messaging, and you figure out the people and like, what stuck with me a lot, what you said there was, if your startup was failing, either your product doesn't properly speak to the people, or it's the wrong product. And it's like, how will you figure any of that stuff out, unless you put it out there and see what the real results are? And so this is an exciting system you figured out here. And so you've been at this for decades, had all these adventures. What do you feel like talking about, as far as a fun case study, success story?

David Hirschfeld 8:49 You see, there's, there are a bunch, but I can talk about when we first started, launch first, because we tested this with three with four different products, four different clients, over a couple years, one of them was a real estate investment portfolio management system platform that we had designed, but we hadn't started developing yet. And we did pre launch sales to real estate investors in this particular ecosystem, and we sold in six first 60 days, the client sold 23 licenses for generated 70,000 in sales. And that was the kickoff for the development of this product. Another one was in aerospace parts distributors. This was software that was going to manage the What's it that the parentage of products. So in aerospace, every single part has to have a certificate and that. And if that part's an assembly of other parts, then you have to have all the certificates for all the parts that go into it, and its own certificate. And on and on and on, until you have the 747, or, you know, a jumbo John of some kind, right? So, yeah, and the. Was no system in place to track these things. So this client, we did the built a really cool prototype, which was just very animated mock ups. Looked like a finished product. It showed the whole vision, and when we demoed it to people, and we did three demos and sold all three of them for $15,000 each, in the space of, like, a week and a half, which is clear that you know product market fit and the and people say, lifetime license, I would never do that. Well, why not? Because you might be giving away an immeasurable fraction of a percent of your market to raise the same amount of money that you would by giving 10 or 15 or 20 or 25% equity away to an investor. And when you do get that life that when you give that customer, they're invested in the product. So when they're testing, when you finally have the first version of it, they're you're proving product solution fit. Now you're not building an MVP for product market fit anymore. You're doing it for product solution fit. And for those of you who don't know the difference, Product Market Fit means you've got a product and you've shown that you've got demand and people will pay for it. Product solution fit is that when somebody starts to use your product, they start to engage with it, and it's solving the problem, and the user experience satisfies them enough where they'll continue to use it and build their usage around it. That's product solution fit. And sometimes you're gonna have product market fit, but then when they get the product, they just won't use it. So that's the neck. That's what you should be building your MVP for is. And since you have all these beta customers, and they've spent this money on it, they're invested to really test the product the way that they need that, though, and these are buyers, not looky loser wannabes. People that do lots of free betas get lots of feedback if people are engaging with the product to some degree, but the feedback they're getting isn't the feedback they need for product market fit. It's not going to help them sell the product most of the time. It's going to help them with product solution fit for the particular people that are in trial, which may or may not be buyers, and you don't know that until they've written you a check. So anyway, so this is so one thing I will talk about, because it requires founders. It's a scary thing to ask people for money for a product you haven't even built yet. A lot of founders like, they have trouble stopping the development and saying, my MVP is complete enough and it's not going to embarrass me. I'm not going to get, you know, the wrong give the wrong impression to the market, because it doesn't have all these features in it yet. And so I they keep going and going and going. I call that failure to pull the trigger syndrome. You know, they're just not willing to and it's a huge mistake. So you have to face your fears that this product may fail, and this you face it really early, and you face and if you do it this way, with like launch first kind of approach, you can find out that you're not, don't have product market fit and pivot quickly because you're getting feedback, why people aren't buying it, and you're not having to turn a big ship. It's not a developed software product, it's a prototype, it's a marketing message. And you can play with both of those, and in two weeks, retest again, and two weeks later, retest three or four times. In the space of a couple months, you can drop pivot three or four different times. Now, if you've built your software, you cannot pivot that quickly. It's a much longer, very costly process to pivot, and your momentum is there, so you probably don't pivot as much as you necessarily need to. So but here it's very easy. You can be very flexible, pivot very quickly. And if after three or four attempts, you're still not product market fit, and you're not even close. People just really aren't buying it, then you can say, Fine, I failed fast and cheap. This is the wrong product or the wrong market, or just the wrong timing, or whatever it is. I've learned something, and I can move on. And I my investment was really limited, and my time, personal energy and personal investment was, was only this big, not, you know, my, like, my whole life, you know, 567, years, and a marriage and, you know, bankruptcy, and, you know, the things I've seen many, many times, which I really hate watching.

Robert Plank 14:16 Yeah, it's no fun for anybody involved, right? And it's, I'm sure there's some amount of regret that happens when, say, a founder, like, makes these too big of leaps, and they're just like, it's like, there's it's ego driven, it's pig headedness. It's like, well, I'll show them. I'll make my idea work. Versus, if you make, like, these shorter jumps and then you pivot based on what people want, it's like, in hindsight or from the big picture, it's a more it's a better recipe for success, rather than just saying, hey, I'll charge through. I'll make it work no matter what. And so these are some exciting ideas you have here, especially where you can be nimble early on and be making these changes to your software and your marketing before all these other pieces are set in stone. And so. You have this, like launch first method, right where now you can apply what you've learned and what doesn't work and what does work. Do you have anything to speak of about as far as, like the present, like, who's using your system now?

David Hirschfeld 15:13 Well, actually, I want to go back to what you just said before I talk about that, because one of the biggest problems, biggest things that founders do, and you know, we've been all been taught, you have to have this, this, this aura of positive thinking, right? You have to drive forward. You have to believe in yourself. You have to believe in your product. And these are all actually recipes for disaster. And, and I don't remember where this came from, somewhere in the 60s, there was a book that was published on the power of positive thinking, and then this took off as a mantra, and it's become a culture and the but if you look, there's been studies done on really successful CEOs, like very large numbers of CEOs, and the ones with the most success and have done the best building. That they are risk averse, they are afraid. They're anxious people. They're not positive, positive power, positive thinking. They are contingency planners. They think of everything that could cause them to fail, everything, right? They spend all their time thinking, Oh, God, if the market shifts here, I may fail. If a competitor comes in with this kind of feature, we might fail. This is what they spend their all their energy on. And so they come up with risk mitigation strategies for every one of these things. And when you talk to one of these CEOs, Michael Dell, or any you know, go back in time to people that built these huge companies from a very simple beginning, right? And you ask them, how were you able to do it? They say, Well, I was in the right place at the right time, and, you know, I was lucky. But the truth is that no matter what happened, they were ready for it, no matter what came across the you know, whatever they that wasn't expected to happen by most people. They had thought about what would happen and how to deal with it if it did. And so they just had a a playbook on what to do no matter what, what the market does, what competitors do, what customers do. They they were highly anxious. People not saying that. I want everybody to start taking Xanax and, you know, and become really anxious. But what I am saying is is, you know, most of us as entrepreneurs, when we want to start something, we have this vision of what we want to do. We believe we understand a problem and we want to solve it, and we fall in love with our product, and we put on the black robe and right, and we start preaching, you know, religion, about why this product is going to be great. And what I'm saying is, if you really want to be successful, throw the black robe away, put on the white coat and become a clinician, and think of everything as a test, everything as recognize everything you're assuming and figure out how you can prove the assumption, or, or, or if it's for prove that it's wrong, and assume your assumptions are probably not right. So don't go into believing the assumptions are right. Anytime you're believing in yourself, you're setting yourself up for potential risk and failure, anytime you're recognizing all the ways that you might fail, and find ways of testing to see if there's a path, then you are basically following the same path as these hugely successful CEOs have followed.

Robert Plank 18:28 That's a great insight, and it tells me that we need some amount of mental flexibility. And I mean, I don't know about you, but, like, I've butted heads with people over the years when I'm like, hey, what about this scenario? And then the response is, oh, don't worry about it. Don't stress out. And I'm like, I'm not letting it guide my emotions or my actions. I'm just, like, thinking through some different scenario and say this thing is like, 8% likely, then they only deserves 8% of my time. But I'm still, like, considering I'm still debugging the system as it were,

David Hirschfeld 18:55 Exactly that's exactly right? Yeah. So, you know, there's people can start companies today. You know, there's so many opportunities with AI and assuming that we're talking about software companies, right? But regardless of what it is, there's so many opportunities. You know, I remember a long time ago reading an article about who makes the most successful McDonald's franchisors, and it was farmers, farmers that left their farm and started to become franchisors. And the reason that farmers made the best franchisers is because they follow prescribe successful methods. They don't try to invent anything. They try to be really good at each step of the process. And the fact that McDonald's documented actually every single thing. It was very easy for somebody with that kind of mindset to buy, to create a McDonald's franchise and blow it up. And be very successful and build more and more franchises. So the idea being that they're not successful because they're risk takers and because they believe that they're going to be successful as a franchisor, but because they follow very prescribed success methods and and grow their businesses. It's not you. So you can do that if, let's say you do have an idea you think it's a great idea. Now, is this an idea you have any connection with personally? And what I mean by that is, are you somebody who just thinks they know how to fix social media, right? Because you know what you hate about social media, and everybody's going to love this, or are you somebody that's in some kind of industry and there's something that you struggle with on a daily basis in your role in that industry, and you know that you were just like other people in this industry who are all struggling with the exact same thing. And you have some reach to that community through networking or whatever, of people that are like you having the same struggle. And you can easily quantify the impact that this problem has on you, and the value of solving that problem, then you want to, and you think, I can create a product to solve this problem. That is a is a recipe for success. You know that your chances of being successful then are grounded. And what you may be solving may be something huge. It may not be from a from a market opportunity perspective. It may be limited from a market opportunity perspective, but, but there's still a market for it. Those are like gold to me. You know, the person who starts a business, starts a software company and turns it in to, after two years, has got a million dollars. Arr, and after another two years, has 5 million AR, you know, it's not the hockey stick, it's not the unicorn, but they are cash flowing really well. They're growing. They've got an asset now worth many times what they're cash flowing. And they've built something that's resilient and successful. And like I want to, I want to work with those people, you know, hundreds of them, because it's fun to watch those, those businesses grow, the ones that go billion dollars like overnight, those are the flutes. And there's 999, that tried to do that, that failed so but the ones that are fit that other model, you know, you've got a much higher chance of being successful if you're in that model and and then you can do it again and again and again, right? Or just build that one company and just keep expanding it and taking advantage of bigger markets and other products and capture customers.

Robert Plank 22:35 It's reproducible, right? And it seems like it's based on numbers and based on empathy and based on a step by step strategy. Instead of saying, Hey, I know how to fix social media only I can fix it. Versus saying like, Hey, I see a real problem. I see who will use it. I see how I'll kind of stack the deck in my favor. I'll see the ways this could go wrong. I'll see what my step by step is. I mean, that's a less risky way of going about it, right? That's a more like logical step by step sequence. And so since we're getting near the end of our time here, tell us about what someone can do, if this excites them, if they're interested in the launch first method, or in tekyz, what's the next step? After listening to our conversation, where should they go?

David Hirschfeld 23:18 Okay, great. I appreciate that. And even before I go there, I want to make one book recommendation. It's called the Mom Test. It's the best I've written. Read a lot of business books, but it's the best business book I've read. If you're in any kind of startup mode at any stage, whether you're a startup or that's starting to scale, or you're you're at the idea stage you need to read this. So the idea is, and it, and it's philosophically, very similar to the things I talked about. It's just much deeper and better laid out than the way I describe what I do from it from the testing perspective. And any, any goes a little farther in terms of the fact that you don't, let's say you, let's say you have a good relationship with your mother, that's sort of critical for this scenario. And you go to her and you say, I want to start this pizza software company that delivers pizza, and she's going to go, that's such a great idea. And you're so smart, I know you'll make it successful, right? That's what your mother assuming you have a good relationship with her, that's what she's going to say. So the question is, let's say you come up with an idea. How would you ask questions from somebody like your mother and actually get honest, valuable feedback that will help you make decisions about whether this is a the right product and the right approach and things like that's why it's called the Mom Test. Anyway, I recommend everybody get that book. So if you want to reach me. I@tekyz.com'm that's my website, T, E, K, Y, Z, and david@tekyz.com is my email. You can find me on LinkedIn, just search for my name, which you have right here. I'll move so that you can see it in black, right?

Robert Plank 24:56 I don't know if that'll show up on the final recording. So let's. All Yeah, okay.

David Hirschfeld 25:01 All right. Last name is David is last name is H, I, R, S, C, H, F, E, L, D, just look me up on LinkedIn, and I should pop up. And if you want to learn about the launch first method, specifically when you go to tech, is at the very top of the page, you'll see a logo for launch. First click on that, and that takes you to a page that talks just about launch first.

Robert Plank 25:27 Very cool. So tekyz.com, T, E, k, y, z.com, David Hirschfeld on LinkedIn. And there's definitely some value here, David, in the idea of software architecture and like, falling in love with the layout of it. Like, man, when I was a teenager, I would go to the bookstore and, like, read through some of these books, and remember, like, Joel on software. Sometimes it's fun. Even when you're mentioning about, like, the airline industry, it's fun to say, like, Well, hey, here's some big ideas. Here's a real problem. Here's where people are really stuck in this niche, in this space. Here's where, after all the all these decades of the farming industry being here, here's the software that they don't have, that they need. And so there's something cool about somebody following you and just tapping into the philosophization of software and how to make it work, how to find that product market fit, how to find that solution fit. It's really cool and exciting once you dig deep into it. And that's how people should dig into. David Hirschfeld on LinkedIn and T, E, k, y, z.com, and as we're about to check out those next steps, those resources and look at into the launch first method on tekyz.com it's time to put you on the spot a little bit here, David and try to stump you somewhat and ask for a fun quote or lesson that has served you in life and business that you can pass on to us. So what comes to mind as far as a quote or lesson?

David Hirschfeld 26:52 Okay, so this one is tied to a story that I learned a long time ago about making assumptions. I said, don't cut the ends off the hem. And when people say, What do you mean? Don't cut the ends off the hem. I say, Well, okay, because that's then I have to tell the story about the the Christmas ham, if do I have enough time to it's like two minutes story,

Robert Plank 27:19 yeah, let's fit it in. I've heard it, but I one has unique way of saying it, yeah, let's do it.

David Hirschfeld 27:25 So Sally is seven years old, and she's helping her mom in the kitchen. She's just now old enough to actually participate, and so her mom's teaching her how to, you know, prepare the ham. And if she cuts the ends off the ham, puts it in the pan and sticks it in the oven. And Sally says, Why do you cut the ends off the ham? He says, because it just makes it taste better. She says, why would that make it taste better? She says, Well, because I'm not really sure, but grandma's in the other room, and she taught me to cook it this way. I know her hands always come out great. So Sally goes in the into the living room and says, Grandma, why do we cut the ends off the ham. And Grandma says, because it makes the ham taste better. And she says, why would that make it taste better? She says, Well, I don't know. I just know we make the best hams, but why don't you call your great grandmother? She's at yours at my sister's place in New York. So she gets on the phone. They all gather on the phone, and Sally says, Great Grandma, why do you cut the ends off the Christmas hand? She says, because my oven is too small. And so anytime you say, believe in what you're doing, or somebody says, we've always done it this way, I always say, don't cut the ends off the ham, which, of course, starts the story. And then they have to think about it

Robert Plank 28:39 and it's worth rethinking me. He's like, Why does my Roku remote not have a power off button? Why does my iPhone not have any buttons at all? Because they tried a new way of doing it, and it worked, and people loved it, and that's what matters. And so as we're considering that, thinking about that, go to T, E, K, Y, Z.com, that's tekyz.com and look up David Hirschfeld on LinkedIn. He puts out some excellent content on medium, so go and see what he's posting about, as far as what it takes to get a hyper, exceptional development team figured out and running. Great to be aI first, to have a startup and a SaaS business that's a success, not one of these many failures. A lot of ways to go wrong, a few ways to go right, and it can be fun, exciting and adventurous, if we have the right mindset, which David can help us do. So T, E, K, Y, Z.com, David Hirschfeld, wonderful speaking with you.

David Hirschfeld 29:34 Thanks. And let me make one shameless plug, depending on when this gets published, I'm I'm hosting a new podcast called Scaling smarter.

Robert Plank 29:42 Very nice. So scaling smarter podcasts. Give it five stars. Listen to every episode.

David Hirschfeld 29:46 Yeah, thank you. I appreciate it. Thank you. And the same here for market of the day.

Robert Plank 29:54 This is Robert Plank from the marketer of the day podcast, which you can find at marketer of the day. Dot com for more episodes and dfy podcast.com forward Slash Free. If you want to know more about running your own podcast or running a better or more fun or easier or less time intensive podcast, go to dfy podcast.com/free to find out more right this instant you. Transcribed by https://otter.ai