Prove that customers want your product

Click here for our LOI template.

This guide has two parts. Part I covers how to assess if anyone wants what you're selling. Part II covers how to prove it to yourself and to VCs.

Part 1: Identifying likely demand

The best way to determine whether you have a strong idea or not is to identify whether you have “market pull”. We will define what market pull is, and outline the process to uncover it. 

Market pull is the force behind "product-market fit.” When you have market pull, the market pulls the idea out of your hands at the same pace you tell people about it; you don’t slog to sell it.

Market pull emerges when three things are true about your target audience:

• Comprehension: Consumers intuitively value a product without needing an extensive explanation of it. (This eliminates the need for extensive sales.)
• Value: Consumers perceive enough value to justify the labor, price, and risk of switching to the product.
• Enthusiasm: Consumers want the product right away. (The enthusiasm of immediacy helps them overcome the friction of switching.)

Let's look at the special product categories we found within the market pull data.

General market pull categories

The closer you align with a market pull category below, we’d argue the greater your chance of experiencing market pull today or in the future.

You don't have to restrict yourself to these, but you should understand how each works so you can borrow their tactics.

1. Create new income opportunities

• Airbnb made home renting a viable income stream for millions of homeowners.
• Uber and Lyft made becoming a taxi driver a viable income stream for tens of millions of drivers.
• DoorDash and Postmates made becoming a food courier viable.

By empowering people to make meaningful amounts of money with little upfront work or necessary qualifications, the billions of people on this planet looking for more income consider using the product. This leads to market pull.

2. Remove extensive labor for a low cost

Using robotics, AI, and sensor tech to automate error-prone or labor-intensive tasks in labs, manufacturing, or daily life generates pull by boosting productivity, safety, and accessibility. Industries like research and healthcare intuitively switch for the "magic" of precision and speed, with no quality trade-offs, especially where labor shortages or regulatory compliance create urgency.

By removing a lot of work plus saving a lot of money, the product becomes a no-brainer for anyone stuck with the alternative. This creates market pull.

3. Lower cost and increase convenience

• Dropbox made file storage much cheaper and easier to access.
• Solugen uses enzymes instead of hydrocarbons to produce industrial chemicals that are cheaper and easier to access.
• SpaceX made launching satellites into orbit orders of magnitude cheaper and easier to access.

In all three cases, these startups aren’t lowering the product quality—only the cost. And because customers were already buying those product categories, switching to an equal (or better) quality alternative that’s far cheaper is a no-brainer.

For in-demand products, a significant reduction in price without a significant reduction in quality can trigger market pull. The pull is even greater if the new products are superior and more convenient and not just cheaper. Convenience and increased benefits of use help consumers emotionally justify the labor required to switch products.

Modest price reductions are most appealing to individual consumers. Businesses, however, may be less price sensitive plus more risk averse and therefore need larger price reductions to switch to a new product.

4. Adapt a proven business model to a new region

Many big startups have become replicated in other countries. For example, Yummy is the Postmates of Venezuela, Airlift is the Doordash of Pakistan, Dukaan is the Shopify of India, Nio is the Tesla of China, and so on.

By adapting $1B+ businesses to new regions, the startup has a higher-than-normal chance of succeeding because its market pull was already validated in another market.

However, the new region must meet some requirements:

1. You can’t be too early to the new region, meaning it must have the supporting technology and infrastructure in place.
2. There can’t be existential cultural barriers to adoption, such as how business is done in that region being incompatible with the business model.
3. The business has to benefit from being localized. (Otherwise, international incumbents will expand to this region themselves.)

Market pull categories unlocked by deeptech

5. Provide capabilities that unlock new markets or lines of business for your customers 

• Varda creates crystalline pharmaceuticals in orbit for pharma companies that couldn’t otherwise manufacture those products.
• Starlink provides cheap, reliable internet for airlines to sell or market to their passengers.
• Aalo provides on-site baseload nuclear power for data center projects that otherwise couldn’t get power.

In all three cases, these companies are giving opportunities to their customers that they would never have had without them. This can lead to an improvement in competitive positioning, further entrenchment with their end users, new revenue streams, or an increase in market size by unlocking new projects, products, or customer segments.

6. Democratize access to something previously reserved for the affluent

• Waymo gives anybody a private, personal chauffeur at a mass market price point.
• Starlink offers high-speed, affordable internet to everyone on the planet, no matter how limited the infrastructure, or remote the location is.
• Joby Aviation aims to offer rapid air transportation, previously only accessible through incredibly expensive helicopters.
• OpenAI created ChatGPT, the first personal assistant that was actually smart and capable—providing a free personal assistant to everyone in the world.

Over time, products and services available only to the wealthy or well-positioned, make their way to the mass market in the same or similar form. Deeptech is uniquely positioned to achieve orders of magnitude reduction in cost and accessibility, democratizing previously unattainable products, experiences, and services.

Should you restrict yourself to these categories?

No, but remember this criterion for market pull:

Buyers must intuitively value the product without needing an extensive explanation of it.

That's why each of the market pull categories above requires you to offer something that people badly want with immediately clear ROI.

I've overseen paid marketing for hundreds of companies, and I will tell you this with certainty: it’s hugely advantageous to pursue an idea that immediately strikes people as a no-brainer when they hear about it. 

In contrast, the opposite of market pull is market push. This is where a startup has to slog to convince consumers they should want the product in the first place. Or, if consumers already want the product category but not the company’s specific product, they slog to convince consumers that the product’s benefits are worth the time, cost, and risk of switching.

This is swimming upstream, and it’s a sign that the market doesn’t want you because your idea is low ROI, your product is commoditized, or that you’re early to your market. The latter doesn't mean you shouldn't start this startup, however. If you have good reason to be confident that market pull will arise in the future, you can get a headstart on the idea today.

That's worth repeating: You don't need market pull today if you're confident it'll arrive in the near future. 

How do you assess market pull?

If you think you have market pull, here's one way to partially validate it:

1. Find at least 100 potential customers that are representative of the total audience.
2. Ask each to rank your startup idea out of 10 on how likely they are to put down a cash deposit for it.
3. Count the percentage of respondents who respond 9 or 10. In my experience, these are the only two numbers that matter. Don’t be misled by 7s and 8s—these numbers often aren't high enough for people to ultimately purchase.
4. Take the percentage of respondents who say 9 and 10 and multiply that by the size of your sample audience. Now you’re getting an idea of what percentage of the market you appeal to and therefore how big your idea is.
5. See if you can get those 9s and 10s to actually pay a deposit. If so, you're onto something.
6. Rinse and repeat for every idea you have.

This is an oversimplified process and it may not work for startups that have to be experienced to be appreciated, but it’s a powerful exercise for many founders.

If you think you'll experience market pull, please pitch us at Julian Capital. We promise to look at your deck within a few days. Three of us spend our entire weeks taking calls based on the decks that come in. We invest $750K or more into hardware companies, and we move fast. We invest $750K or more into hardware companies, and we move fast. When we invest, we help build your customer acquisition pipeline and branding, and we are unparalleled in our ability to help you raise future rounds thanks to the Deep Checks network we run.

Part 2: Using LOIs to prove demand

To invest, VCs need to believe that people will pay for your product. Sustained revenue from customers is the ultimate form of proof that you're building something people want. Everything else is a leading indicator.

But some leading indicators are better than others. For deeptech startups, Letters of Intent (LOIs) serve as a convincing tool to demonstrate potential revenue when actual sales are not yet feasible. In startup land, the term LOI is used so broadly that investors have grown skeptical of its significance in pitch decks. Not all LOIs are equal, and that’s why it’s very easy to drop the ball here when pitching.

What is an LOI? It’s a mutually signed document that formalizes a preliminary commitment, between a startup and a customer, to collaborate. It’s typically focused on a specific project, pilot, or partnership. It outlines proposed terms—such as scope, timeline, and commitments—and signals the intent to negotiate a formal, long-term agreement.

Let's learn how to do them properly.

What are LOIs good for?

1. Alignment between startups and their future customers.

Founders often misinterpret customer enthusiasm, skewing their product roadmap towards misleading feedback. On the opposite side, customers often confuse a minimum viable product (MVP) with the founder's long-term vision, creating misaligned expectations.

2. Predictability for your business.

Signed LOIs provide startups a critical level of predictability, enabling them to allocate time, capital, and other resources toward a customer committed to reciprocating within a defined timeline and revenue.

3. Filtering out the time-wasters and distractions.

If customers really want what you’re selling, they should put their money where their mouths are.

What makes a great LOI?

An LOI doesn’t need all of these ingredients, but the more it has, and in more stringent terms, the more valuable it is as a signal to your team and to the VCs you’re pitching.

1. A written intention to purchase on a clear timeline.

It’s not enough for the customer to simply express interest in learning more or evaluating the product once it’s ready. The LOI should explicitly state the customer’s intent to purchase the product by a specified date, provided the agreed-upon specifications be met within that timeframe.

2. Clear product performance metrics that when met, convert to a purchase order.

Use the exercise of writing an LOI to identify the features your customers care about most, along with the minimum acceptable thresholds for each that are required to convert them into a purchase order. 

3. Defined purchase order volume and at what price.

The document should outline what will happen if the performance metrics are met within the proposed timeline—specifically, the number of products the customer will purchase, the agreed-upon price, and the expected timeframe for the purchase.

4. Include repercussions for not following through on the agreement.

It might feel like overkill to ask your first customers for this level of commitment. However, if you’ve generated strong interest and are confident in the value your product delivers, you’re actually offering them a competitive advantage by giving early access ahead of others. In return, it’s reasonable to ask for accountability—such as agreeing to penalties if they fail to follow through on their commitments.

How to get an LOI signed

1. Highlight how the LOI itself benefits your customer.

Clearly articulate why signing the LOI benefits the customer, not just your startup. Emphasize tangible advantages like early access, exclusivity, discounted pricing, or unique insights from being an early adopter. Avoid framing the LOI as something that you need—it must solve a customer’s problem or give them a competitive edge.

2. Co-create the LOI.
   Draft the LOI collaboratively with the customer to ensure alignment and avoid surprises. Share a clear, concise draft outlining scope, timeline, and mutual commitments, and invite their feedback. This joint process fosters ownership and minimizes objections, paving the way for a smooth signing.

3. Create a sense of urgency.
   Introduce a time-sensitive incentive to encourage prompt signing. For example, highlight limited capacity (e.g. “We can only support three customers in this phase”) or a deadline tied to early adopter benefits. Ensure the urgency is genuine to maintain trust and ensure you always have a back-up plan if they fail to meet the deadline.
   
   
4. Get it signed by leadership.
   Keen investors will pay attention to which person at the customer has signed your LOI. The level of intent is meaningfully different if the LOI is signed by a department manager versus the CEO of the company.

What is an LOS or MOU?

A Letter of Support (LOS) serves as third-party validation, acting as a proxy for traction when firm commitments are not yet secured. An LOS carries significantly less weight than an LOI. It demonstrates that customers, partners, experts, or other stakeholders endorse your vision enough to lend their name to it.

An LOS can be valuable in the very early stages of company building, providing a signal of market or expert validation—strengthening grant applications or early investor conversations by showcasing external support.

While terms like LOS, LOI, and Memorandum of Understanding (MOU) may vary across industries, MOUs typically focus on partnerships or collaborations. They outline how two parties will work together to explore opportunities, solve problems, or co-create, generally avoiding specifics about purchase orders or commercial agreements.

In deeptech, LOIs are critical for demonstrating tangible traction, such as customer commitment to a pilot, while MOUs are better suited for exploratory or strategic partnerships.

How to find customers to sign an LOI

Securing LOIs is a larger part of your general sales process, where common wisdom remains true: 

1. Identify the right internal decision makers—people with decision-making and purchase power (sometimes your internal user might be different from these two people, and they can sign less binding letters of support). 
2. Understand their needs and goals while building your relationship with them. 
3. Present a clear, concise LOI. Don’t introduce strictly binding terms that might hold a company off, unless they’ve indicated they’re open to this. 
4. Provide a compelling case to sign and be ready to handle objections. Introduce urgency when possible (“We’ll only have capacity to work with five customers for the first year and want to work with you, but to be fair to others in the process we need this signed by X as a confirmation of initial intent”). 

Read the next guide in our series: How to hire a team of killers.

—Julian, Jacob, and John from the Julian Capital team