A top priority for Purpose Built in Q1 2023 was to build a “lead faucet” for our founders.
Imagine if, as a founder, all you had to do was turn a faucet and you could talk to an endless flow of potential customers – to see if they really have the problem you thought, and if they’re willing to pay to solve it.
At Purpose Built, we focus on helping founders mitigate market risk: can we get three, then ten, then 30+ customers willing to put money down for a product that doesn’t yet exist?
When we’re speaking with people about a real problem with a promising solution, the answer is yes. Otherwise, some of those people will tell us why our solution doesn’t work or what problem we should actually solve for them. So long as we have a customer faucet, we can stop wasting time on bad ideas quickly and find our way to winners.
By the end of Q1 2023, we ran 193 customer acquisition experiments, sent 41K cold emails with a 3.8% positive engagement rate (i.e. clicks or a positive response), and conducted 450+ customer calls.
In case you don’t love painstaking analysis of growth experiments, here’s the TL;DR of what we’ve learned so far:
For the founders, customer development aficionados and other startup geeks – click to navigate to the question you’re most interested in or read on:
• Typical “successful” tests book around 1 call per 100 emails delivered
• But almost half of our campaigns get no results at all
• Successful tests range from 0-10% positive reply rate
• How results varied by idea
• What positioning worked best for startup founders
• What positioning worked best for business brokers
• Our first demand test
• Full exploration: 13 customer segments and 29 tests in 44 days
Subject Line options/examples:
a. {First Name}} <> Purpose Built
2. Value proposition:
a. Additional down payment resources
b. Salary negotiation package to offer to your clients?
c. Interested in …. <<Value Proposition>>
3. Problem:
a. Do you know what your company is worth?
<INTRO (Sound like human)>..<WHO YOU/WE ARE (quick credibility)>>.<<HOW WE FOUND THEM (flattery/explain why the reader is being reached out to>>
<<WHY REACH OUT (2-3 emails max, keep short people don’t like reading)>> <<WHAT DO YOU WANT FROM THEM>>
<<REPEAT ASK>>
THANKS
Name
Calendly
(Note, we’ve left the typos in – we were moving fast.)
Example 1
Hi {{name}} —
I’m Jen – a mom and entrepreneur. I found you while searching for professionals who work with young children.
I wanted to reach out to share a project of love I’ve been working on: Coral Care. Coral Care is the easiest way to find great local development therapists and specialists for young children that's covered by insurance.
I’ve attached a summary of the program for parents in case it’s helpful to anyone in your community. I would so appreciate it if you could share it with anyone who might be in need of this service. I believe it has to be easier for children to get the care they need.
And if you have feedback, questions, suggestions — I would love to talk with you. Feel free to schedule time with me directly here.
Thank you so much!
Warmly,
Example 2
Hi {{first_name}},
It’s nice to meet you! I'm a global serial entrepreneur and I’m working with Purpose Built— a venture studio that builds businesses that expand economic opportunities for more people. I found you while looking for leaders at {{company_name}}'s career centers.
As a dad, I saw firsthand how difficult and cut-throat it was for my daughter to find the right educational opportunity for her and we eventually found a pathway for her to study abroad in France. She’s thriving and I would love to create more opportunities for young people to find international placements. I'm an entrepreneur who has worked from Mexico and United States, and there has to be a better way for international students--AND American students, to know what countries they're qualified to work.
As someone who works closely with students during this critical time, I’d love to get your feedback on the student experience and what we’re building.
Please let me know if that works for you!
Thank you,
Let's Chat
Example 3
Hi {{first_name}}
Its nice to e-meet you, I’m NAME at Purpose Built Ventures. We’re a venture studio looking to increase economic opportunity for middle class Americans and support growing businesses. We found you through looking for leaders in small & medium businesses lending.
I am a business founder and entrepreneurship enthusiast, and want to help people find the right bank, banker, and partners in their entrepreneurship journey. We’re looking to talk to people and better understand capital constraints for small businesses. We are working on a few ideas, but would love your point of view!
If you have 20 mins to chat, I’d love to speak with you! (I have a calendly in my signature if that's easy for you!)
Cheers,
NAME | Calendly
PurposeBuilt.VC
Across all campaigns, we typically see 30-70% open rates, 0-4% of clicks and positive replies, and 0-2% calls booked. A “successful” test would have around 0.5%-2% meetings booked of total emails sent, with 25-50% “no show” without work to screen out lower intent customers from booking calls.
Most tests don’t work at all – 93 of 193 got no clicks, and no positive responses.
Although this is partially because we run a lot of really small-sample tests – 104 of 193 had less than 100 emails delivered.
Some of these are small tests looking for a big signal – if highly personalized, and we’re 0 replies for 50, we know it’s a failure. Others represent issues we catch early and stop (i.e. lots of upset replies or low open rates that could harm future deliverability). Others, we realize early that we can make major improvements, so we stop and iterate quickly.
If we sent 200+ emails in every test, we’d have many fewer “zero response campaigns” – but increasing the precision of failed tests isn’t worth the effort.
While remaining tests mostly concentrate between 0-2% positive responses (with anywhere from 25-50% of these ultimately resulting in bookings).
And analyzing percentiles of positive replies and clicks shows the range of “non zero” replies – that are possible – really strong value propositions from a cold email can get 10% clickthrough or positive response, and typical “successes” get 2-3%.
When analyzing results per idea, you can see that some just don’t resonate – this could be a lack of product or problem resonance, or a lack of channel fit (the target customer doesn’t respond to cold email).
After testing almost 80 customer segments, there’s a huge range in response rates. And we found consistently that some (real estate agents, contractors, medical professionals, teachers & administrators) are much harder to reach than professionals more used to working over email.
Aa a venture studio, our goal is to speak with potential customers to identify and validate both problems and solutions.
We’ve tested three main ways of positioning our ask for a call:
We learned that focusing on a problem without a solution rarely works – it’s obvious in hindsight, but without a potential solution, there’s no reason to talk with us.
Product positioning can be effective, but we need to have a good understanding of the problem, and how to effectively position both the problem and our solution to a particular audience. Usually that takes at least a few conversations with potential customers. But we often start here, as it’s a good way to figure out that something – your segmentation, problem, or product positioning – is off.
Customer advisory positioning is especially useful early in our process. It’s most effective when our email emphasizes three elements:
To illustrate this, consider two segments where we tested all three approaches: startup founders and business brokers.
With startup founders, the Advisory board positioning was most effective – likely because of founders’ general interest in networking with us as a potential investor.
When reaching out to business brokers, positioning around a specific product was more effective.
A good example of the full exploration process is Coral Care, a marketplace for parents to find affordable, local speech pathologists, occupational therapists, and other therapists for their children – nearby and on their insurance.
We started out expecting to engage medical professionals as referral channels – thinking that pediatric doctors and nurses might be a strong referral partner, since they often are the first point of contact when children miss developmental milestones.
In less than 11 days sent 900 emails w/ yield of 11 engagements with medical professionals–a hard to reach segment, including: medical residents, med students, nurses and speech language pathologists.
While the response rate was low, a 0.5% success rate from doctors allowed us to quickly learn that this channel was possible but would take time and resources to build. An overall yield rate of 1.22% got us the calls we needed to rule out medical channels early on.
Over 6 weeks, we were test demand from 13 different customer and channel partner segments:
