How to Learn What Customers AND INVESTORS Want (Proven Startup Method)

In this video, we are going to talk about how to build something that customers want, but also build it in a way that you can talk to investors and investors will want to invest in you. Now you might be thinking, well, isn't it just a foregone conclusion that if you build something customers want, investors will want to invest in you, but that's not necessarily the case because there's a way to impact or influence the way investors invest in you, how motivated they are and what type of terms that you get based on how you present it, figuring out what customers want is the first thing, but doing it in a way that motivates investors to invest in you is another. There are also plenty of times when I've seen a founder, launch a product, get actual customers, but the investors still aren't interested. And we want to address that issue in this video. Before we continue, my name is Ed Kang. If we met before, welcome back to my channel, use the chapter markers as usual to skip right to the good part of the video. If we haven't met before, I'm a seven time funded founder with two exits. And that's just a fancy way of saying I've failed a bunch of times to your benefit because I use YouTube videos like this and my channel to try and help early stage founders, especially if you're raising that early stage capital, avoid some of the catastrophic mistakes that I've made, not to say you're not going to make mistakes, but I'm going to try to make your life a little bit easier, especially when it comes to things like customer discovery, idea validation, and making sure you have the right story to raise that money. Also chief strategy officer for startups.com. If you're part of startups.com, thank you so much. If not check us out there, a lot of free resources. While you're here, do the YouTube thing, like comment, subscribe. It's always helpful. Let's jump into the video. Let's talk about Cluely. You might've already heard about this startup. It's been getting quite a bit of buzz recently because of its latest funding rounds, Cluely started in 2025. It's important to understand and keep track of these dates because it raised $5.3 million in April claiming to be an AI cheat tool for everything from interviews and any type of function where you need a proactive AI to help you quote cheat when you are trying to answer questions, do an interview, have a conversation, Cluely was profitable this year by the time it raised another funding round of $15 million in June. That's only two months after its initial 5.3 round. That is significantly faster than typically what you see. And there's a reason for that because the market is frothy. It's an AI, but also profitability and it's significant growth and traction in the marketplace. We're going to talk about how Cluely managed to do that based on the theme of this video. But overall, the post money valuation of Cluely is $120 million. That's from launching this year in 2025. And to make this story even more intriguing, Cluely was rejected by Y Combinator, not sure if there's a flex or a troll, but they're doing pretty good despite being rejected from the largest accelerator, most prominent accelerator in the world. The question is, how did these young founders figure it out? They are barely like 21 years old from my understanding. And they came out with commercials that were considered pretty controversial on the internet. This one's about a young man using Cluely to date a woman and basically cheat on the date. But after they received their investment from A16Z, I started watching some interviews and A16Z says flat out the reason they invested in Cluely was because anybody can build a product. And if another competitor comes in and says, I want to do the exact same features, what's the differentiation for these young startups? And Cluely understood how to go viral, how to get out there and build something that customers not only want, despite the fact that there's been so much criticism about their commercials that have gone viral saying, this looks like an episode of black mirror and I would never use Cluely, this is absolute cheating. Their traction metrics, the user growth says differently compared to everybody else's moral opinion out on the internet. Now I'm not endorsing one way or the other, but if you really boil it down, is it really cheating when you're using AI pretty much for everything? The difference was that Cluely is more of a proactive AI that actually listens to you and sends you the answers ahead of time before you have any type in and ask the AI questions. And that's important for this conversation because we want to build something that customers want. We want to go out and sell it in a way that investors look at us and say, okay, you not only have development figured out, but you have distribution locked in. Take my money. I don't want to be missing out on this potential unicorn. And this reminds us that everything has changed in this AI first, AI native environment where founders can go out now and basically hack away using conversational language and start building MVPs and create novel ways to apply this new AI technology, because we're not going to be competing with building LLMs like rock or XAI. We need to figure out how to take the technology that's out there and put it in some type of form that customers want. And they'll rave about, they love to get those growth metrics that investors are looking. Now to explore what you can start to do out there as a founder to achieve the same type of results, we need to look back at the other ways that typical idea validation and customer discovery have occurred that have been successful in the past, but may not necessarily apply today. The principles remain the same, but we're starting to see this shift and that's what we want to talk about. And we're going to explore these different methods. The first and most common method that I see out there is the build and wait method. It's so easy to go out and hack a product together using the agentic coding, all the other platforms that are available that I see messages on Reddit and people send me these messages, you out there, subscribers say, okay, I'm building, I'm just about to launch and I'm going to go for feedback or I built something, I've launched it. And what happens is there is no feedback. It's just crickets. Nobody cares. And that's because higher standards are out there right now in terms of if you put out a half baked potato, while someone else has maybe put out a little bit of a better offering. And so because of the competition, users will go and look for something else if they get frustrated by a half baked MVP. Furthermore, the feedback can be so ambiguous because you just put this out there and you don't know what they're actually saying, what they're asking for. They just tell you, well, I don't like this and I don't like that, but what do you do with that feedback? What happens is, and I see so many founders do this at startups.com and founders that I talked to online, they go and they start adding this feature and testing that feature. And they're sort of throwing darts in the dark. After throwing that dart, founders hope that they hit something, but when they go to switch on the light, there is no switch. Founders remain in the dark, constantly pivoting or iterating or adding different features to try and figure out what is going to move that needle. And often it never comes because they're going in the wrong direction. You're actually firing the darts in the wrong direction the other way when the dartboard or the customers are this way. This might've worked back in the day when it was very difficult to build something so you could build an MVP and get initial feedback. Let's say a demo or a landing page, but the standards are higher now, the competition is greater, and this is something you have to pay attention to. The second method, which is only marginally better, is to go and ask what people want. You go out to an industry and say, Hey, what problems do you have and what solutions do you want me to build for you? And like I said, it's marginally improved. However, the issue is that nobody can predict the future, especially with novel solutions. People will tell you all day long their problems. They like to complain about their problems, but then when you ask what they want in terms of the solution, they may say something, but they're not going to know if they're actually going to use it until it's sitting right in front of them. And then you have the same risk of building it only to have nobody care whatsoever. If you read the mom test, you know that customers lie to you all the time, but simply asking them what they want and going out and building it doesn't mean you have a worthwhile problem and a solution that is worthwhile to become a startup that investors will want to invest in. I see these posts on Reddit all the time. Well-intentioned founders go and they ask, what solution would you pay for? What are you looking for? That would absolutely change your life. And the answers are all over the place from, I don't know what you're talking about to well, a genie in the bottle or facetious remarks and comments that only confuse the conversation and frustrate the founders. Let me give you a personal example that you might've experienced. I have family members that are pretty indecisive when it comes to trying to decide what they want to eat. If I go to them and just ask, what do you want to eat? They go, uh, I don't know what options are available and they hum and they haw, and then I get frustrated, but I don't just want to make the decision myself because then I could be wasting time and money, buying something for them and getting them to eat something that they really didn't want in the first place. The only way I've been able to solve this problem is to present some binary options and start to take them along the pathway, a process to actually determine what they're willing to commit to when they want to finally eat. I'll start with a particular type of food. Do you want pasta? Do you want Chinese? Do you want pizza? And then I'll give them options on the different types of restaurants available in that category. And then I'll have to factor in their previous experience and what they've eaten through the week. It's crazy making, but that's the same thing that you have to deal with when it comes to customers. But while my family has a certain responsibility to make my life easier, it is not the customer's responsibility to make your life easier as a founder. You are the one that's going to have to figure it out and put in the work. And that's why we're here. The third method is another improvement, and that is to ask about the problem. Instead of asking them what they want, you want to have a conversation about the problem. You're using the mom test and you go and research the problem and look at it from all different angles and get very familiar. You're going to get that type of advice often from channels like mine and experienced founders because the principles are true. The challenge with this one is that you as founders become vulnerable to tunnel vision, cognitive bias, and quote pit slapping. Sometimes founders get so focused that they can't see the force through the trees. That's the tunnel vision. They block out everything else and they're not looking at something holistically. They don't look at other factors that might be impeding the solution from occurring or changing the dynamics of the problem. So if you're talking to someone who has a particular problem, but you're not looking at the macro aspects of why that problem exists, you still might be solving for the wrong thing. Another challenge is your cognitive bias. You want to hear so badly that your solution that you already have in is what they want that you're going to ask either leading questions or you're going to misinterpret their answers to your questions about their problem and say, yes, absolutely. My solution is the best. You live in your own echo chamber and everything that you hear basically echoes what you want to hear internally. Nobody wants to get rejected and I get it. That's a human condition. That's the reason we stack the deck in our favor when we're talking about problems and then finally we get into the almighty pitch slapping. If you have tunnel vision and you're stuck in cognitive biases, then most likely your quote customer discovery interview or idea validation interview where you are talking to users, potential users about your problem really becomes a pitch slapping session. You cannot wait for them to stop talking so that you can cram a solution down their throat and basically get into the same thing. Do you want it? And the user has to stumble backwards and they're just going to be polite and say, sure, I want it. That's something that I could use. You go out and build it. And then when it comes time to put their hard earned money on the table, sign the deal, become the user, sign up, whatever it is, they are nowhere to be found. Pitch slapping is not an enjoyable experience on the giving or the receiving end, especially the receiving end. I get pitch slapped with cold queries by LinkedIn, social media, emails all day long, and I don't get up in the morning saying, gee, I can't wait to be solicited by a founder and neither do your customers. Not to mention if you are exhibiting these types of behaviors, investors are going to see that and they're fundamentally going to understand that you will not get anywhere in terms of founder market fit. You won't be able to do founder led sales. You won't be able to figure out how to get that traction. Therefore, the investment is not de-risked enough and you will not get funding from investors. Let me show you a methodology that I have developed over the years that has been getting me great results even to this day. I call it the 4Q EQ method and EQ is there because you want to have empathy for your customers. Empathy is the willingness to step into their shoes and experience what they're experiencing, have compassion on them so that you can build a solution that fundamentally serve them as people and gives them that emotional payoff that makes them become raving fans of your startup and investors will see that and get motivated to invest in you. Each quadrant is a set of questions and the first quadrant is the what questions that you're going to be asking, such as what do you normally do when trying to solve this problem? Another version is what happens when this challenge pops up in your life? What do you normally do? You are going to be asking questions about the current solutions or the way they solve the problems right now using those current solutions or the alternatives. You are not going to be pit slapping them with innovative out of box ideas that are completely novel that they've never seen before. Introducing solutions right now will not give you the information you need. You just want to ask how they're using the current solutions and that's going to be the starting point. After the what questions we moved to the next quadrant and that's when I follow up with the when questions and I'll ask questions such as when do you use it or need it the most when they tell me what they've done, I'll ask other time-based questions such as when do you decide to use that type of solution? Timing is going to be so critical. How many times have founders pitched the right prospect with the right solution for the right problem just at the wrong time? That's why you're asking these when questions, maybe it's every tax time or maybe it's after a board meeting or maybe it's after an emergency that information is going to significantly increase your chances of deriving that novel insight that you're looking for and that the investor wants you to have. Moving on to your next quadrant are your how questions and they look like this. How did you like it? How can it improve and how did you decide? One thing you might stumble over here is that people are perfectly fine with those solutions. This happens all the time just because you can build a different solution doesn't mean people want to use it or people are unhappy with the current alternatives to the solutions or the problems that they're facing. Now, if they say, no, I'm perfectly happy with the solution. It is not your opportunity to interrupt them and say, well, what about this? What if we had a better way of doing it? If they're not unhappy or they're not uncomfortable, then they will not have the energy, the activation energy to change their behaviors. And you are going to have a very difficult time with distribution of your product. Investors see this a mile away and they start to think if I have to invest money, how much of this is going to go to try and change those behaviors because it's not a painful enough problem. It's not a unique enough solution that causes people to look at the other things that they're doing and say, wow, this is much better. You'd much rather sell to people who are dissatisfied with the current state and condition. And that means you can always go look at the solutions that are out there and continue to innovate on top of that. Let me give you a personal example of this. Think about video games before it was video games and arcade. You went and you plugged in quarters and that was great. But I really want to play video games at home. Then video game consoles came on the scene and I could play video games at home on my TV. Fantastic. Now I want to play video games on the go. I'm dating myself here, but I remember buying one of the first game boys. It was like this little monochrome screen and I love playing video games on long drives. And for a while, the video game industry was either consoles or computers at home or these take them with you so you can play on mobile, such as on your phone or even its own console in such a small form factor that it filled that need. But then Nintendo came along and said, Hey, let me talk to the customers. Let me see their user behavior. And they realized that one of the pain points or dissatisfaction that customers had about the current form factors was they wanted to be able to play at home and play on mobile without having to buy multiple consoles. So they went and they say, we're going to develop the switch and we're going to go right down the middle and allow people to switch between playing at home or playing mobily. And guess what they found? The slight majority of people still want to play on mobile. However, those that switch back and forth equally split time between playing on console, playing on their TV and playing on the go. Nintendo managed to differentiate itself in a sea of competitors with computers, phones and consoles and is doing quite well. And we're watching the next version of the switch come out right now. They've cornered this little piece of the market. They've got their own defensibility with their IP, with their hardware. And that's how you want to be thinking when you're asking customers how they experience the current solutions, not pitch slapping them along the way, but looking for those unique insights. Finally, the last quadrant is something that founders miss out on all the time. And these are your who based questions such as who else is involved or affected or who else should I talk to? I got this from a mentor of mine who would always say when talking to a company or talking to any client about their problem, always ask who else should be in this room to participate in this conversation. By asking those who questions, I gain very unique insights on how decisions are made and who the decision makers are. Sometimes I find out I need to be marketing or developing features for a different set of users in correlation with the primary users that I'm looking at. Or other times I find out the users I'm looking at are the wrong users, such as when you're trying to get kids to use your software, it's really the parents that are paying for it, or let's say you're an ed tech and you're trying to sell teachers, it's really the administrators, like the principals that are making those decisions. One of my previous ventures was an ed tech company, and we were trying to sell to HR directors, the HR department to sell to the rest of the organization. We realized they weren't the ones making the decision. They all went talk to the CEOs. So we said, let's just skip the HR people and go right to the CEO. Once we started developing action plans, marketing plans, outreach, sales development to the CEOs, making those sales for ed tech platform was so much easier. The CEOs would literally say to their HR department, start using this product. And our life became so much easier. We began developing product market fit to get used to this methodology. Just start repeating in your head. What, when, how, who say it again with me, what, when, how, who these questions cycle through my mind pretty much anytime I'm talking to a customer or anytime I'm talking to other people about solving a problem and I want them involved, you can practice these questions in every situation I do with my kids. What do you think is going on here? When did this start to happen? How do you think we got here? Who else should we involve in this conversation? The more you practice them, the more natural your cadence becomes and your customers that you're doing an interview with don't start to feel weird and start to feel interrogated. But let's go back to Cluly and look at the result by listening to their customers and looking for that unique insight. They came up with this interface, basically the proactive AI that would allow you to cheat on a date and they knew what commercial to put out there. This is another example. And while many people might complain and say, this is unethical, it's really what people want. The difference is Cluly was courageous enough to be controversial. I'm not saying you need to be controversial, although it helps. I'm saying at least be contrarian. I have a lot of founders putting out contrarian messages in the marketplace that sink into their products and they're doing quite well, or at least say something different to what everybody else is saying. Be differentiated. And like I said, that takes courage. Let me give you some pro tips. Don't use the word, why use other words? Let's test this here. If I ask you, why haven't you gotten funded yet? How do you feel? Think about that for a moment. What's the initial reaction? How about, why is it your pitch deck good enough to attract those investors? Why don't you have enough traction to get investors? Instead, how about this? What challenges are you experiencing right now that are stopping you from getting funding? What issues are you facing with your pitch deck that you think are holding you back from getting that investor? What are the friction points that you're experiencing with traction right now? You see how that's a completely different conversation and that's the reason you don't want to use the word, why, because it's a brain science thing, people react to the word, why they go into the left side of the brain. They feel interrogated. They get defensive and you want to avoid that when you're having conversations with your potential customers, listen for what they don't know. They don't know. Allow them to talk and then stumble over that unique insight. They're not going to tell you if they already did know what they wanted to know, they'd be telling you. If they already did know what they don't know, they'd be asking you. By you asking them questions, you're going to find these unique conversations and these points are going to start seeping up. They're going to float up to the top and that's what you're going to eventually tell investors. Remember what you're looking for is the novel insight and I spell insight insight because you want to look inwards. You want to have the customer look inwards and you want to get sight on what is happening inside of that. Listen for the feelings, listen for the thought patterns, the rationale, listen for what they perceive, listen for what they think is going on and listen also for the misconceptions or where they have mistakes or they've naturally made assumptions that this is the way that it always is. It's kind of like being a therapist when they ask, well, how did that make you feel? They are asking for an insight to help you. It's the same thing with your customer. And by the end of the conversation, you are going to ask if you can follow up with a demo, not a sales pitch. Big difference here. You're going to say, if I came up with a demo that would solve the problem, meeting your needs in a better way than the current solutions out there, how interesting would you be in a demo? Can I count on you to give me some feedback? It'd be very important because this has been such a valuable conversation. You are not asking if I came up with a solution, would you sign a contract, an LOI, or how much would you pay for it? Immediately they start to get their backs up against the wall and they think they're going to be signing up for a sales pitch and you are pit slapping. You want to avoid that whatsoever. You're not using empathy at that moment in time. You're being selfish and saying, I want to shortchange the line. I just want to get right to the point where I'm selling to you. Give yourself a breather, give them a breather and go slowly into it. You're looking for a conversation, not a conversion. Continue the conversation. Don't kill it. Trying to convert, convert, convert. Nobody responds well to that. And last but not least, keep meticulous notes on the ICP. This is going to help you later on with your go-to-market strategy. Figure out who you talk to, what they said and all the conditions there are, as well as the demographics, the psychographics, the firmographics, whatever is going to help you understand the ICP so that you can use that data to advance your startup when you need to get more traction, but Ed, you might be thinking, this is a lot of work. It's a lot of upfront work. I just want to go build. And I get it. Founders are builders. And some of you like hacking away and building things way more than selling or talking to customers. But when I was in entertainment and I was an animator and then I became an animation director, I learned that the more we put in pre-production to get things right, because it's much cheaper to do things on paper, to draw a story boards and to make sure that we got things figured out rather than make mistakes later on and balloon up the budget because we didn't plan for something and we ended up animating the wrong thing, or we made an assumption and the scene turned out really bad and didn't test well with audiences. And we had to go into reshoots or produce the entire scene again, which was incredibly expensive compared to just figuring it out at the pre-production phase. It's the same thing here. The more that you do in idea validation and customer discovery, figure out what customers want, the more you're going to be prepared to have those investor conversations, but the less time resources and heartache that you're going to have to expend trying to figure out what to build only to have customers be nowhere around, they do not care it's crickets and you're very frustrated and you have to go all the way back to the drawing board or you're pivoting your product and you become a solution looking for a problem, which investors can see a mile away as well. If you do all this correctly, you will be able to share your story with investors and have the metrics to back it up. And let me assure you when you are insightful and you share with investors how you have journeyed and how you have gone to get the unique insights that you are delivering to back up those metrics, investors will see you as a type of founder they want to back because they will know that you understand how to go out and talk to users. You will have that story that draws them in and they will think to themselves, gee, if I'm going to back any founder, I want to back this founder who understands distribution, understands how to go viral, understands what customers really want. But like I said, investors just aren't interested in the final destination. They're also interested in how you got there because that's going to show them how you get to the other areas, how you get to the other levels of achievement, how you get to that other inflection point using their money, try it out. And if you have any feedback or you want to update me on your progress, I'd love to hear from you. I've got other videos are going to help you then translate what you've done here into your pitch deck to get investors excited. Watch the other videos. I appreciate you spending this time with me. I'll see you again soon.