Letter of Intent

Convince potential B2B customers to sign a 'letter of intent' stating they would like to purchase your product as soon as its finished.

ViabilityCommercial

What is Letter of Intent?

A Letter of Intent (LOI) is a powerful B2B validation tool that transforms verbal interest into written commitment from potential customers. Unlike simple surveys or interviews, an LOI requires prospects to formally document their purchasing intent, creating a higher threshold of commitment that filters out casual interest and identifies genuine demand. This technique bridges the gap between customer discovery and actual sales by creating a quasi-contractual document that demonstrates market validation to stakeholders while building your early customer pipeline.

The power of this method lies in its ability to test real commercial viability without requiring a finished product. When a business decision-maker signs their name to a document stating purchase intent, they're making a reputational commitment that goes far beyond clicking 'yes' in a survey. This creates valuable quantitative data about market demand while simultaneously building relationships with your most committed early adopters. For B2B startups, letters of intent can be game-changing validation artifacts that demonstrate traction to investors, partners, and internal teams.

When to Use This Experiment

• Pre-MVP Development: When you need to validate demand before investing significant resources in product development • B2B SaaS or Enterprise Solutions: Particularly effective for business software, platforms, or services with clear value propositions • Fundraising Preparation: When you need concrete evidence of market demand to present to investors or secure funding • Product-Market Fit Testing: After initial customer discovery interviews reveal strong interest, but before building the full solution • Partnership Negotiations: When seeking strategic partnerships and need to demonstrate committed customer demand • Resource Allocation Decisions: Before committing significant development resources or hiring decisions • Market Entry Strategy: When entering new geographic markets or customer segments and need local validation

How to Run This Experiment

Develop a Clear Value Proposition: Create a concise, compelling description of your product's key benefits, target problems solved, and expected pricing structure. This forms the foundation of your LOI conversations.
Identify and Research Target Prospects: Build a list of 20-50 ideal customer profiles based on your customer discovery research. Focus on decision-makers who have budget authority and the problem you're solving.
Create Professional LOI Template: Draft a simple, one-page letter of intent template that includes: company details, product description, expected timeline, approximate pricing, and clear intent language without legal obligations.
Schedule Strategic Sales Conversations: Reach out to prospects through warm introductions, LinkedIn, or direct outreach. Position calls as exclusive early access opportunities rather than sales pitches.
Present Solution and Gauge Interest: During conversations, present your value proposition, demonstrate early mockups or prototypes if available, and discuss their specific pain points and requirements.
Request LOI Commitment: For highly interested prospects, explain the LOI concept as a way to secure priority access and influence product development. Emphasize it's non-binding but shows serious mutual interest.
Follow Up and Track Results: Send LOI templates immediately after positive conversations, follow up within 48-72 hours, and maintain a tracking spreadsheet of responses, objections, and conversion rates.
Analyze and Iterate: Review patterns in successful vs. unsuccessful LOI requests to refine your approach, value proposition, and target customer profile for future outreach efforts.

Pros and Cons

Pros

• Strong Validation Signal: Signing an LOI represents significantly higher commitment than survey responses or interview feedback • Builds Sales Pipeline: Creates a qualified list of early adopters who are likely to become first customers • Investor-Grade Evidence: Provides concrete, quantifiable proof of market demand for fundraising and stakeholder presentations • Zero Financial Cost: Requires only time investment, making it accessible for bootstrapped startups • Customer Development Opportunity: LOI conversations provide deep insights into customer needs, pricing sensitivity, and feature requirements

Cons

• Time-Intensive Process: Requires significant personal outreach and relationship-building, which doesn't scale easily • Non-Binding Nature: Letters of intent don't guarantee actual purchases, creating potential overestimation of demand • B2B Limitation: Technique is primarily effective for business customers; consumer markets rarely engage with formal intent processes • Requires Strong Sales Skills: Success depends heavily on founder's ability to conduct effective sales conversations and close for commitment • Potential Reputation Risk: If you can't deliver on timeline or value promises, LOI signers may become disappointed and vocal critics

Real-World Examples

Segment, the customer data platform, used letters of intent effectively during their early validation phase when they were pivoting from their original analytics classroom tool. The founders reached out to potential enterprise customers and secured multiple LOIs that demonstrated demand for their customer data infrastructure solution. These letters of intent were instrumental in helping them secure their Series A funding and validate their new business direction.

Slack's Stewart Butterfield employed a similar approach when transitioning from their gaming company Tiny Speck to the communication platform. Before building the full product, they secured letters of intent from several companies that had experienced their internal communication tool and wanted to implement it organization-wide. These LOIs provided crucial validation that there was broader market demand beyond their own team's needs.

Zapier used letters of intent during their early stages to validate demand for their automation platform. By approaching potential customers in specific verticals like marketing agencies and e-commerce businesses, they secured written commitments that helped them prioritize which integrations to build first and provided social proof for their value proposition to subsequent prospects and investors.