Defining Your Value Proposition For Early-Stage Startups

Imagine you’re at a noisy party, and someone’s asking you what your company does.You’ve got thirty seconds to explain what it is that makes your startup unstoppable. Take longer and you’ll see their eyes gloss over and they’ll excuse themselves to go and get another drink. If it’s not really compelling, and the person isn’t left saying, “wow, that’s awesome, I had no idea that was even possible,” then you’re not doing a great job in selling your business.

And if you can’t convince your new friend at the party why you’re onto something unstoppable, how are you going to convince investors?

Here’s where the value proposition comes in. Make no mistake about it, these things are tough to define when you’re at the earliest stages of a startup. You’re still navigating your way to being product-market fit, so coming up with a compelling value proposition might seem like wizardry at this point, but there are ways to do it.

What I Did

It took me around seven or eight years to build out ToutApp before we sold it to Marketo, and one of the things that I remember most clearly about the early days was how I wound up with a value proposition.

Back then I was relying on Uber a lot to get where I needed to in San Francisco.Twice per day I was jumping in an Uber, and with San Francisco being what it is, the drivers are pretty savvy and interested in startup culture. They would inevitably ask me what my startup did.

I fumbled it at first, and really struggled to explain this company to these drivers. But practice does make perfect, and because I was trying to explain this thing twice per day, everyday, I started to get really good at it. Eventually I was able to describe it, using simple, clear language. I would say “we’re a software company that automates the number of touch points a sales person makes across email, social media and phone, and this generates more leads.”

That’s when the drivers started to say “oh, that’s cool.”

That’s the power of the value proposition. Everything becomes much easier when you can nail what you do at every cocktail party, every investor interaction, and every customer interaction.

Why is it important to define your value proposition early on?  

Your value proposition is at the heart of all your go-to-market activities in the startup stages of the business. If you get it right, and truly nail it, then it becomes this inspiring thing that will help you sell more, raise more, and clarify for everyone—including your own people, what the urgent problem that you’re solving is.

The value proposition is what defines the business model of your company, and explains how it will generate revenue and profit. It explains who your customers will be and why they will use your product.

Investors won’t look twice at a company that hasn’t nailed the value proposition.After all, if you don’t know what is going to make your startup unstoppable, why should they back it?

So, if you want your startup to get off the ground and really flying, you’re going to want to put some effort into the value proposition right at the start.

Creating an effective value proposition for your startup

It’s hard. I’ve already said this earlier, but it bears repeating: coming up with a value proposition when you haven’t yet got the market-ready product is hard. Don’t let this get you down. Get the pot of coffee ready, put whatever tunes on that get you in the mood to concentrate, and settle in for a session.

The good news is that while the thinking and writing of the value proposition is difficult, the process is not. There’s a simple, four-step process, which will give you all the material that you need to fill out a value proposition canvas. Once you’ve done that, you’ll be able to distill everything that you’ve thought about down to a single, short sentence.

What is the value proposition canvas?

The value proposition canvas tool looks like this:

What this tool does is help you to focus. You want to focus your strategy on that magic fit between what you’re going to be making and why people will buy it. You break those two things down and there’s only a couple of elements to each. And that’s why it’s so important that you address all of them—all six of them above—within your value proposition.

Think of it like a paint-by-numbers game. The picture isn’t finished until every bit of the canvas is fully painted in.

The next question you’re going to have is how you go about getting the paint on to the canvas. Here’s my approach:

1) Identify the challenge that your value proposition will address

Why are you making the product in the first place? Why does your startup exist? It’s to address an urgent and pressing problem that people—your eventual customers—are having. In my case, with ToutApp, it was the inefficiency of the sales process. Eight to ten touches to convert a lead into an opportunity is inefficient and results in too much time being spent on each individual customer. It is a problem.

Why go through this step? Because too many startup entrepreneurs lead with “our product does…”—and that’s not the right approach. Assume that people don’t want more products. We’re all already spending too much on too many products as it is. Assume that people want to be able to solve problems, and are willing to spend money to achieve that solution. That’s the point of step one. It gets you thinking in the right direction.

2) Ask yourself what is the risk and/or cost associated with the problem

“What happens if the customer doesn’t solve the problem?” This is an important question to ask, because while you’ve identified an “urgent problem” in the first step, the consequences of that problem have yet to be made clear.

Some consequences are more severe than others. Some consequences for ignoring (or failing to find a solution to) a problem carry a high degree of risk to a person or business. For example, if there’s a massive new cyberattack that’s targeting organizations, then there’s a huge risk that, without a security solution designed to stop the attack, you’re going to get hacked. Most people would be willing to spend money to prevent that from happening.

This is an important thing to be able to articulate, because it drills right to the heart of your value proposition. If you can get a customer saying “we’re paying X or exposed to Y risk, and it’s too much—it sucks,” and show them that you’ve got the solution, you’ll have their attention.

3) Now you look at your product in the context of the problems it solves

The third step is to start looking at your own startup and the product that you’re going to be developing. Make a list of the features and benefits of the product, but put them in relation to what you’ve written out in steps one and two above.

Just assume that the customer, investor, or other stakeholder isn’t going to be interested in a list of features and benefits. They’ll love those features and benefits once they’re using your product, but before that, to catch their attention, they’re not going to be interested in a dry list of bullet points.

Instead, ask yourself how those features and benefits address the problem that your customer is facing. How do they mitigate the risks and/or reduce the costs?

Most significantly, also outline how completely your product will address these problems. Is it a solution in totality—making the problem go away completely? The more your company is going to do to help a problem go away completely, the more interested they’re going to be.

4) Finally, prove it

This will be something you add to your value proposition later, once you’ve got customers, but proof that the solution works and delivers what you’re promising will be critical as you start to scale the business. Customer case studies that hone in on the problem and solution can help to explain in real terms the benefits of giving you their business.

So, make sure that some of your first customers become case studies that highlight what you’ve done for them. Future customers will expect to see this.

Once you’ve completed these steps, you’ll then be able to “paint” in the value proposition canvas. From there, the last task is to take that information, and summarize it in no more than two sentences that can be recited in 30 seconds.

If you’re keen to learn more about how to apply this tool, check out my videobelow as I walk through it in more detail. 

Some great examples of value propositions

Value propositions are not an inflexible mathematical formula. Beyond the need to make them short and address the customer problem, there are no specific rules that you need to follow. It’s a creative exercise, so forget about formulas, and just allow your expertise in what you’re doing to drive the words.

Here are some examples of startups that were able to leverage their value proposition to become unstoppable.

1) Slack: “Make work life simpler, more pleasant and more productive.”

When you think about Slack, you do think about how the company took dry unified communications technologies, and spun it into a platform that looks and feels like a fun social media experience, only for work. The problem was that communication was fragmented across multiple apps, and it was hard to keep track of conversations, much less track the latest documents and updated tasks lists. Slack solved this by streamlining it and allowing people to collaborate entirely within the one platform.

2) Grammarly: “Great writing, simplified”

The audience for Grammarly have lapped this value proposition up. What Grammarly actually does is check your writing for spelling and grammar issues in real time. It’s basically an automated sub-editing tool, but rather than try and make the value proposition something along the lines of “an AI that spell checks and assists with grammar,” the company made it much more straightforward. You use the tool, you write better. That’s an unstoppable promise.

3) Apple iOS 14: “Looks brand new. Feels like home.”

Apple is, of course, anything but a startup, but the way it created a value proposition for iOS 14 is an invaluable lesson on how to think about your own. Apple was in a tricky spot, as the iOS operating system was firmly entrenched by the time iOS 14 came along, but it needed an overhaul to account for the very different way that people were using their smartphones. But, by doing such a comprehensive overhaul there was the risk that customers might rout. A lot of people don’t like change.

So, Apple created a value proposition that aimed to address the customer concern, and potential problem both it and the customer faced: “what if I don’t like the Apple iOS any longer?” They did this not by listing off all the features and benefits from their new OS. They didn’t try and convince people of how important the new update was. Rather, they realized what the real (potential) problem for customers was and countered it by assuring them that “under the hood” the experience remained the same.

4) Shopify: “Anyone, anywhere, can start a business”

Starting a retail business is not easy. Especially online, given the size of some of the competitors that you’re up against. Over the years many people who had a dream of starting up a small boutique retailer for their crafts, personal art projects, or particular niche projects, have given it up due to the complexities involved. From having an ordering system, to building a website, there was the impression that you needed a full Web development team to have a retail business online.

Shopify’s value proposition cut right to the heart of this problem by promising that you could start that retail business with no expertise whatsoever, immediately removing all the logistical barriers that had stood between people and their dreams. There was no need to mention the tools or features that were available, or even that it was free to trial. All that mattered was that Shopify made an impossible dream for micro-businesses suddenly possible.

The Bottom Line

The value proposition is not about selling your business. It’s about selling what the business will do for the customer. This customer-centric statement proves that you’ve identified a problem in people’s lives and their jobs, and that you’ve got a solution for it. If you get this right, you will look back at the early stages of the business, as I have, and realize that it was with the value proposition that the business started on its unstoppable roll.