Zen Business co-founder Shanaz Hemmatt says one thing took her business from a startup to $1.7 billion company in five years: conducting her research.
Hemmati and co-founder Ross Buhrdorf launched the company, which develops AI software to help first-time entrepreneurs navigate the regulatory requirements of starting a business, in 2017.
Five years later, that business was valued at $1.7 billion and was backed by big names like Mark Cuban.
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Hemmati told CNBC the key to that success was getting feedback from as many potential clients or customers as possible, which allowed her and Buhrdorf to ensure their business model was as successful as possible.
"When you have an idea, you already have identified a pain point you want to solve for," she told CNBC. Figuring out how to best solve it, however, can't be done in a vacuum.
When she and Buhdorf were first toying with the idea of ZenBusiness, they "spoke with roughly 50 to 100 prospective customers to understand what they needed most — everything from formation help to ongoing compliance and growth services," she says. "We ran design sprints, tested different packages and pricing, even built websites and refunded early sign-ups just to see what caught people's attention and what they were willing to pay for."
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Although the process was long and effort-heavy, Hemmati says it proved invaluable when it came time to launch. It gave her and Buhdorf "incredible insight and…confidence."
"Having that communication and collaboration, constantly interviewing your potential customers and learning about what is the next product that they're interested in, and how you should even go about building it," has been the key to their success, she said.
Steve Blank, co-creator of the Lean Startup movement and author of "The Startup Owners Manual," agrees with Hemmati's advice.
"The most important [question when starting a business] is: ‘Well, who are my customers?' And the second one is: ‘What do they want?' It's not: ‘Here's what I'm building. Can I sell it to someone?'" he told CNBC.
Blank points to one of his own biggest professional failures as an example of what can happen when you don't do the proper research before launching.
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In 1993, he co-founded video game company called Rocket Science Games. The company managed to raise $35 million for the project, but the whole thing fell flat upon launch. It turns out, customers didn't enjoy playing the games Rocket Science was putting out, and sales never materialized.
While the company eventually closed in 1997, Blank told Business Insider its trajectory may have been different if he'd taken his own advice and sought out customer feedback early on.
"The biggest killer for me, and the biggest failure, was hubris," Blank said. "Don't believe your own bulls—. It's really easy to get convinced about your passion and your vision."
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