Clickable mockups

Most teams think they need to build an interface that functions and looks real before showing it to customers to get feedback. Nope. It turns out that if you string together a few simple mockups with clickable hot-spots, you can still get great feedback in a fraction of the time. We’ve done this with companies like HomeAway, AVOS, and Duo Security by designing a few screens in a flow and then building a clickable version, using basic consumer software tools like InVision or Apple’s Keynote.

At first I thought these prototypes would be too rough to be useful. But time after time I’ve seen customers engage with click-throughs like they’re real products, and that helps you learn if the designs are working. It’s a great method to use before engineering starts to build a design.

Customer interviews

Instead of working in a vacuum, gather data to use as fuel for designing your product. Specifically, go out and find the people you think will use your product and talk with them about the problem(s) you’re aiming to solve. I know you’ve heard this a hundred times. Customer interviews are like flossing — everyone agrees it’s good for you, but it’s hard to build the habit.

It’s easy to get hung up on the details: How do you find people who will talk with you? What do you talk about? Relax. User researchers have been doing this stuff for decades, and there’s a wealth of knowledge about how to do it quickly and accurately. For starters, you can write a short survey called a screener to help you recruit the right people to talk to. Then, create an interview script to help guide the conversation.

If you want to know more, we created a research guide with plenty of tactical tips for finding and interviewing customers. Now you have no excuse. Get out of the building! (Then come back — there’s more good stuff below.)

Fake doors

You can quickly see whether customers will engage with a new feature by launching just the first part of it. We did this with CustomMade, a startup that lets people order custom-built products. Our idea was to let visitors save others’ projects for inspiration. But instead of laboriously building the whole feature, we just launched the first button. When we observed a huge number of visitors clicking the button to access that function, we knew we were onto something and built the rest of the feature. After a few changes like that, we saw a 3x increase in engagement. For more on fake doors, see Jess Lee’s excellent talk.

Recon

When teams design a new product, they come to the table with all sorts of assumptions about the competition. It’s easy to look at another product and have an opinion about which parts are valuable and which parts are broken. But if you guess wrong, you might just copy a bunch of functionality that your customers don’t actually need.

So we like to think of competing products as free prototypes. We watch customers use these products and learn very quickly which features are loved, unusable, ignored, or hated. With this knowledge, we can make better decisions in product design, marketing, and sales.

Micro-surveys

Surveys are a tempting way to learn from the comfort and safety of your office chair. But designing a good survey is surprisingly tough. Whenever I talk with survey scientists, I’m overwhelmed by all the ways you can screw up a survey design and unknowingly get bad (read: useless) data. So when we run surveys, we stick to a pattern we know works well.

We put the survey as close as possible to the behavior we’re trying to study. For instance, if we’re interested in why a customer picked one of our pricing plans, we’ll ask them with a small pop-up survey in the moment, not an email that might get read days later.

And we rely on open-response questions that let us hear directly from customers. You’ll learn more from reading 100 short responses than knowing that 32 percent of users chose option B in your survey. Here’s more on micro-surveys.

Prototype with real data

Clickable mockups are a good first step, but you can learn even more when you build a prototype that integrates real data. You might be tempted to start building the actual product at this point. You might even call that work-in-progress a prototype. But it’s not. Building a real product always takes longer than you think. If you really want to learn fast, build a true prototype – one that you’re not afraid to throw away.

When we were designing coupon pages with RetailMeNot, we needed real coupon data in order to evaluate our designs. So we built a prototype in two days. It was buggy and didn’t have many features, but it was just enough to get useful feedback from customers. And it was good we did, because it turned out that half our ideas weren’t working.

We iterated three more times, building prototypes and showing to customers, and were able to get to a design that improved both usability and click-through rates. Few startups build true prototypes, but it’s an immensely useful way to learn fast.

Site visits

Go to wherever your customers are, and watch them actually use your product. I know that sounds like common sense (or it should). But it’s too easy to think we know our customers from all the meetings, phone calls, and reports we’ve read about them. To deeply understand how people actually use our products we need to go to where they work, where they play, and where they live.

Recently, we were working with Foundation Medicine to improve their clinical cancer genomics reports. So we decided to visit oncology centers, watch how doctors used the reports, and see what we could learn. We were surprised to discover that the reports we’d worked so hard to design were often received by fax. Tiny text was hard to read and all color information was lost. It was an easy problem to fix, but we only noticed it through a site visit.

Being a lean startup means that we should first consider all these ways to learn, and then pick the fastest, cheapest method. I’ve listed seven methods that we’ve found work well at startups, but there are plenty more out there. Once you start looking, you’ll be surprised at the variety of ways you can learn incredibly fast, saving you and your team precious time and money (and heartache).

Braden Kowitz leads Google Ventures Design Studio. Follow him on Twitter@kowitz or through his team’s blog Design Staff.

Photo courtesy of Shutterstock.

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The average user might book his flight several months before taking a trip, Hipmunk CEO Adam Goldstein explained, but that same person often waits a lot longer to book his hotel (perhaps explaining the success of companies like Hotel Tonight). And when users do go searching for hotels, they want to know a few critical things: Will the hotel meet the time slots they need? What kind of neighborhood is it located in? And will there be hidden fees or questionable wifi when they check in?

Hipmunk’s new hotel search product attempts to solve these problems from a couple of angles. The site will now provide reviews from local travel writers recommending certain neighborhoods within the city depending on a person’s needs, it will provide pricing and available of wifi and parking, and it will provide calendar integration for business travelers and no-date searching for casual vacationers.

“When we started the site, it was based entirely on what we viewed as the biggest headaches in travel. Which was simply the process for searching flights initially, then moving on to hotels,” Goldstein said. “We thought the flight product does that really well, and the hotel product still has room for improvement. So it’s a big development for us.”

One interesting aspect of Hipmunk’s hotel search is that it isn’t limited to traditional hotels. The company has been listing HomeAway and Airbnb listings already, and Goldstein said while he can’t disclose the exact numbers for traditional versus home-share bookings, Airbnb has been tremendously successful on Hipmunk.

“If those users disappeared, it would have a significant impact on our bottom line,” he said. In June the company raised a Series B funding round of $15 million, with funding so far from  IVP, Ignition Partners, Y Combinator, SV Angel, and a number of angel investors including Ashton Kutcher.

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“We were lucky. Larry and I, we just wrote up the check,” Google co-founder Sergey Brin said in an interview. “This is a really exciting way to be really impactful on the world.”

We've increased our fund by 50% to $300MM a year. We plan to invest $1.5B in startups over the next 5 years. #gvsummit—
Google Ventures (@GoogleVentures) November 08, 2012

Founded in 2009, Google Ventures is the venture capital arm of its parent company Google, and does a wide variety of deals, from 40-50 seed-stage investments under $250,000 to a few deals under $10 million. So far, the firm has invested in companies like Nest, which makes connected thermostats, HomeAway, a popular vacation rental site, and RelayRides, the ride-sharing company.

The additional funding will allow the firm to do more deals and especially to do follow-on rounds for companies that are expanding rapidly, but managing partner Bill Maris said the growth in fund size isn’t just about the number of deals they want to do.

“It’s a further affirmation of what we set out to do, which is to find and invest in the most disruptive and interesting founders we could find,” he said. “It doesn’t necessarily mean that we’re going to do a lot more deals, or that we’re going to do a lot bigger deals.”

But Maris said it gives the firm the ability to invest in the right people at the right time, with fewer restrictions on their deal size and scope. He said co-founder Larry Page asked him what he would do with $1 billion, but that it was important to the partners to scale responsibility — just like their startups do — and take on the right amount of funding they could handle for the size of the team.

“A billion a year is not something we can reasonably do,” Maris said. “300 was picked because it was an increment above 200 million.”

Maris said they’re especially interested in investing in mobile, cloud services, and big data. But like most investors, he said they’re betting on smart founders.

“Sergey and Larry are what made Google different from every other search engine out there,” he said. “That’s what we’re looking for.”

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EQAL said in a press release that the advantage of its platform will be its simplicity and close links to existing Facebook, Twitter and YouTube accounts. Users will be able to create profiles, discuss topics among each other in forums, and view episodes. Around the time it raised $5 million in funding last year, EQAL had acquired a white-label social-networking platform. It used the platform most recently for Harper’s Globe, its companion web series for CBS’ Harper’s Island. The idea is to move the community that builds around a show out of the free-for-all on sites like YouTube and MySpace and onto a platform that’s dedicated to it.

EQAL said Umbrella will be a simplified version of this enterprise service, giving site owners the ability to harness information about their users drawn from them connecting up their Facebook, Twitter and YouTube accounts.

But while being able to control the environment around its shows has been good for EQAL, it’s now putting itself into competition with heavyweights like Ning that have serious amounts of funding and have sunk large amounts of time into building easy-to-use white-label social sites for celebrities and entertainment properties. Making original content might have turned out to be an exceedingly difficult business, but white-label social networks are not exactly an open frontier.

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As part of the HomeAway financing, a portion of the money will go toward repurchasing some of the shares held by employees and early investors in the Austin, Texas-based company. CEO Brian Sharples wouldn’t disclose how much money, or what percentage of shares, affected employees would be able to exchange for cash, but traditionally such deals are fairly rare. However, in the last few months I’ve talked to a growing number of entrepreneurs who have negotiated such deals. The fact that they’re becoming more common, especially in younger companies, shows how for some, the economic downturn is spurring a lack of faith in the venture model.

That model is one that rewards entrepreneurs and investors for building up a solid business over a 5- to 10-year period, then selling it, either to the public through a stock offering, or to an acquirer for a sum that makes those years of work worthwhile. It’s the American dream, Silicon Valley-style. But what if entrepreneurs aren’t willing to wait that long? And what if the exit markets aren’t open?

As deals like HomeAway’s show, that’s precisely the environment we’re in now. When a venture-backed company does such a deal it’s generally because employees who have taken a lot of equity in it want to exchange that equity for cash. Usually equity holders get cash after a company exits, via either an IPO, merger or acquisition. With the IPO window shut (so far the total number of IPOs are down by 81 percent this year), and M&A slowing, that’s looking less likely.

Sharples explained the decision to offer shareholders the ability to cash out as a reward for the work employees have put in. The company had planned to go public in 2008, but given the appetite for IPOs, have shelved the idea for at least two more years. This would disappoint any shareholder, but HomeAway is only three years old. For early investors or founders to expect an exit in three years is ridiculous. Other than back in the bubble years, most venture-backed startups don’t achieve an exit for seven years, and in some cases, such as with clean technology, investors are looking at 10 years before a payday.

HomeAway is more of a private equity business model (the company is buying up Internet properties that list vacation homes available for rent in the U.S. and potentially worldwide cities), so perhaps that explains the short time to a planned exit. But HomeAway isn’t alone. Facebook has allowed its early employees and shareholders to sell some of their shares for cash, despite being only four years old. Digg, the news ranking and aggregation service founded by Jay Adelson and Kevin Rose, raised $28.7 million in September, a deal that rumored to have involved Rose taking some cash.

It’s a win when employees can cash out, especially in such dismal times, but raising money in order to buy back shares has the potential to set a lower fair market value for the startup, as well as to dilute the value of shares held by existing shareholders. These sorts of deals are a sign of stress in the venture model, and we’re likely to see more of them if it remains difficult to take a company public in the coming year.

This article also appeared on Businessweek.com.

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