From Assumption to Evidence: How Customer Discovery Creates Investment-Worthy Startups

Insights from Embarc Collective’s Angel Investor Summit featuring Embarc Collective coaches Kate Heath and Jason Putorti

At Embarc Collective’s inaugural Angel Investor Summit with Queen City Angels, Kate Heath (Brand and Marketing Strategist Coach and SVP of Marketing at Certus Core) and Jason Putorti (Product Strategist Coach and Executive Director & Founder of ResistBot) delivered an insightful presentation on one of the most critical yet often overlooked aspects of startup success: customer discovery.

What Is Customer Discovery?

Kate and Jason emphasized that customer discovery is not just a box to check—it’s the foundation upon which successful startups are built. Customer discovery is “a very thoughtful and strategic process that we use to validate our assumptions about the customer, what they have to get done, and what their problem is with having to get that thing done,” shares Kate.

Importantly, customer discovery is about the human beings you serve, not your product. As Kate pointed out, “Hospitals are not customers… Hospitals do not have checkbooks, nor do they have problems, but the people who work inside them do.”

Why Customer Discovery Matters

Jason and Kate emphasize why customer discovery should be at the forefront of every founder’s mind:

1. It reduces the risk of building something nobody wants. The number one reason startups fail is lack of demand—building something that not enough people want or are willing to pay for.
   
2. It provides founders with the confidence to make better decisions. As Kate noted, “Your customer has already told you what to do. You just didn’t listen.”
   
3. It creates an emotional bond with your customer. Which helps founders stay resilient through difficult times. When you’re genuinely invested in solving your customers’ problems, you’re more likely to persevere.
   
4. It impacts every aspect of the business. From marketing and product design to pricing, distribution channels, hiring decisions, and potential partnerships.

The Pivot Is Not Failure

One of the most valuable insights shared was that “there is no shame in the pivot game.” Many founders resist customer discovery because they fear discovering their original hypothesis was wrong. However, Kate and Jason emphasized that pivoting based on customer feedback is a sign of strength, not weakness.

“If you put forth a hypothesis or an assumption, you do the work and you find out you are wrong. That is actually a good thing,” Jason explained. Pivoting early saves founders from wasting time, resources, money, and energy on something that won’t succeed.

Customer Discovery and Product Development

Jason shared insights from his experience at Mint.com, highlighting how customer discovery informed their product development. By observing how people actually used their product, like mothers who were frequently interrupted while managing finances, they made crucial adjustments to their session timeout settings.

He contrasted this success with failed ventures that skipped customer discovery. One example was a political app that received $55 million in funding but “did not solve a particular problem for anybody.” Another was a parking app that copied Uber’s model without understanding the unique challenges of its market.

Red and Green Flags for Angel Investors

The duo provided valuable guidance for investors evaluating startups:

Green flags include:

• Strategic approaches to validating customer challenges
• Willingness to pivot based on customer feedback
• Intimate knowledge of customers beyond demographics
• Understanding of customer behaviors and product context
• Incorporation of data and experimentation into discovery
• Comprehensive market understanding (talking to at least 50- 100+ potential customers)

Red flags include founders who claim nothing surprised them during customer discovery or who can only describe their customers in demographic terms.

The Takeaway

The overarching message was clear: customer discovery is not optional. It’s the foundation upon which successful products and companies are built. As Jason summarized, “Value is benefit minus cost,” and you cannot truly understand the benefit without deeply understanding your customers.

For founders, the message is to fall in love with your customers and their problems—not your solution. For investors, look for founders who demonstrate this passion and have done the hard work of truly understanding who they’re serving.

In a world where the majority of startups fail due to lack of product-market fit, thoughtful customer discovery remains the most powerful tool in a founder’s arsenal.