The fairy tale startup success story is this: A brilliant first-time founder has an even more brilliant idea. He (and it's always a 'he' in the fairy tale) raises some funds to try
After a few MVPs, The Founder has found very strong traction. Using this momentum, he raises again and for that money, hires an awesome team that helps him scale this brilliant idea. After a few more years of constant wins, the company is worth hundreds of millions. Stakeholders rejoice as they already plan what to do with all the money. Life couldn’t get any better.
This is a story that almost every tech startup founder plays towards. Every experienced founder, especially the successful ones, also know that it has nothing to do with reality. So to start our journey towards strong product market fit and a sustainable business, we need to start right here. With the founder’s mindset.
As a founder, there are hundreds, if not thousands of things you could be doing. They all seem urgent, but looking back, only a few have a real impact on your business. Naval Ravikant, the founder of Angelist, says that 99% of what you do won’t make any real difference. The mastery is in how quickly you recognise this and focus in on the 1%.
But rather than focus on the 99%, let’s look at the 1%. From my experience as a founder and design & product leader, I’ve distilled three key mindset shifts that successful entrepreneurs show. I believe that in an early stage business these three things are always in that impactful 1%. Let’s dig in.
In the early stages of building a new business, product-market fit IS the business. The market opportunity, defined and verified, and a real scalable product to fulfil it, are all there is. And this is the one job the founding team can’t delegate. They can and will draw on others — team members, advisors, consultants and customers. But going through this journey is the founders' task. The big ideas and the vision are just the cost of admission to set out on the journey.
Let’s look at two models to frame the importance of product market fit.
At a very high level, an early-stage business goes through three stages:
What most teams do is skip the second step, and go straight to scaling their initial ideas. That’s precisely why 80% of startups fail early, burning through the capital to realise the idea before checking if that’s what the customers actually want.
The second model is a classic 2x2 Product development matrix from Sequoia capital. You can read more about it in the original article by Sequoia. To make this model closer to reality, we can easily take what we now know about product-market fit and chart the optimal journey for an early-stage venture.
As you’ve seen, product-market fit is not just one of the things you might think about as an early-stage founder — it is THE thing you should be actively focusing on. Discovering if there’s an actual need for your idea on the market, tweaking the product to make your customers love it more, and making it into a business is exactly what’s going to set your startup for success, for many years to come.
Let’s borrow a quote from one of the most brilliant minds of the 20th century — Albert Einstein.
“If I had an hour to solve a problem I’d spend 55 minutes thinking about the problem and five minutes thinking about solutions.”
Most problems today, especially ones that have a real impact on people’s lives and the planet, are complex system problems. This means that our solutions, without a proper understanding of the problem, can be completely unpredictable and have a range of side effects, both positive and negative. Look at Facebook and its impact on politics and the state of our mental well-being for one example. Understanding complex problems takes time and learning. It takes really understanding all the complex interactions between the elements of the system and identifying what those elements are in the first place.
And in the startup context, the best way we can learn is by trying our assumptions and ideas in the real world and improving them based on results. This means constant testing, asking lots of questions, not being scared of potential failures, reading books and consistently trying to figure things out. Trying to learn something new every day and seeing how to apply it to the startup is what outstanding founders do.
Because ideas are such a personal and important part of building a new business, it’s natural for us to get attached to them. Turns out, that’s the opposite of what reliably successful creators (and entrepreneurs) do. Let’s look deeper into this by separating ideas from vision. This is a distinction made very well by Seth Godin in The Dip.
The vision is the big picture of what you’re committed to. A good vision can be deeply personal, universal and unchanging at the same time. It’s most effective when it’s tied to a specific outcome in the world, a state of things when the work of your venture is finished. The state when you’ve won and your business is ‘done’. Ideas are simply some of the ways of realising that vision. They are invitations to act, investigate and test. They can be wrong or right and you never really know which one they are before you test them.
Here’s an example: The vision: Purpose-driven business is the dominant way to do business and is supporting us to avert climate change.
The outcome: At least 50% of businesses across the world have SDGs built into their core decision-making process by 2030. The private sector has lowered carbon emissions by 20% globally.
The idea: A social network where purpose-driven organisations can showcase the impact of their CSR actions and hire purpose-driven employees that will accelerate change.
I hope that in this extreme example above you can see how important it is to keep the distinctions clear. The social network may or may not be something that can help us realise the outcome. It’s simply one of the ways of doing it, and the market (and our capacity to deliver) will tell us whether it’s the right one.
This takes humility and tons of it. It is admitting that your first idea was not the best thing since sliced bread is challenging and takes courage. But just remember that the idea is not personal, the vision is. Use it to drive yourself and your business forward.
Congratulations to our client Brief for landing one of the top spots on Product Hunt.
We tend to think that creativity is for artists, and we certainly don't approach business as a creative process.