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Name your customer on day one
Family or retailer
The biggest tension at Instacart the entire time its former president was there was whether the customer was the mom and dad who get groceries delivered every day, or the retailer that gave Instacart the right to deliver those groceries.
What paid the bills
For the first three years it was oriented as a consumer business, and retailers took Instacart seriously only because customers were coming to Instacart.com looking for groceries. From around 2015, if the company had looked inward, it was more of an enterprise business, building enterprise-grade technology on behalf of grocers, and that paid the bills.
The company didn't want to acknowledge that for a long time. Since he left, the company has fully understood who its customer is.
Why do two-sided businesses blur their customer?
Economists Jean-Charles Rochet and Jean Tirole analyzed platforms that serve two groups at once in a 2003 paper on two-sided markets. A platform often charges one side little or nothing to attract the other side, so the group that pays is not always the group the product is built to please. Credit cards, newspapers, and shopping malls all work this way. Tirole won the 2014 Nobel Memorial Prize in economics, partly for work on market power and regulation.
Why do enterprise contracts pay the bills?
Enterprise customers sign multiyear agreements for set fees, which makes revenue predictable. A consumer product often needs enormous numbers of people to generate similar income, and many consumers pay little or nothing. Salesforce, founded in 1999, helped popularize selling software to businesses as a subscription.
How do startups learn who their customer is?
Entrepreneur Steve Blank laid out a method called customer development in his 2005 book The Four Steps to the Epiphany. It has founders leave the building to interview prospective buyers before scaling the product. Eric Ries built on the idea in The Lean Startup, published in 2011.
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