Y Combinator Question 21 + How To Answer: Which Customer Should You Go After First?
This question from Y Combinator explores your startup’s market entry strategy. A start-up needs to identify not just a general market but the specific customer segment that will most likely be the earliest adopters of the new technology or service.
Part of the series:
Y Combinator: 40 Questions and 40 Answers
Y Combinator: 40 Questions and 40 Answers
1. Why Y Combinator Asks This Question
Y Combinator wants to see that you have a clear understanding of your target market and a strategic plan for initial engagement. The first customer segment you target can set the tone for your early growth trajectory and help validate your business model.This approach shows that you’re not just thinking about who will eventually use your product but who will be most beneficial to target right from the start.
2. How to Answer the Question
To effectively answer this question, you should describe the customer segment that will most likely experience the problem you solve with the greatest intensity and frequency.Detail why this segment will benefit most immediately from your solution and how they are accessible.
Discuss the characteristics that make them ideal early adopters, such as their openness to new technology, their influential nature within the market, or their ability to provide valuable feedback and advocacy.
For example, if your start-up offers an AI-driven content creation tool, you might focus first on digital marketing agencies that handle multiple clients and need to scale content production efficiently without compromising quality.
3. How NOT to Answer the Question
Avoid vague or overly broad characterizations of your first customer. It’s important to be specific and strategic, not just choosing an easy target but one that aligns with your long-term vision and provides valuable early-stage insights and validations. Avoid selecting a customer segment simply because they are the easiest to reach, without considering their potential for growth and advocacy.4. An Example, Based on a Tech Start-up
Consider a tech start-up, SolarSolutions, that develops innovative solar panel systems for residential use. Here’s how they might respond:- Target Customer: “Our initial focus should be on environmentally conscious homeowners located in sunny, suburban regions where electricity costs are high. This customer segment not only faces significant utility bills but also typically has a higher disposable income and a vested interest in sustainable living.”
- Reason for Selection: “These homeowners are likely to be early adopters because our solar panels can significantly reduce their energy expenses while also aligning with their environmental values. Additionally, suburban homeowners often have the necessary space for installation and can influence neighbours and local communities, helping us create a strong local presence and word-of-mouth momentum.”
Combinator assesses how well start-ups understand their initial market entry, ensuring they have a clear plan for engaging with the customer segment most likely to adopt and champion their innovation from the start.