Tips to a Thriving Startup
The number 1 reason startups fail is “no market need”. That, is a fact.
Founder disputes, bad early-hires, lack of funding – they all play a part in the demise of a startup, but if you’re building a business no one cares about, you’ll die a miserable and confusing death. “No market need” is synonymous with attempting to sell a polished turd.
Never fear though, my first-time founder chums. Here are 4 nuggets of advice I share with every entrepreneur I work with. And when followed, not a single company I have helped has yet to fail (touch wood). So, let us begin.
1. Define your core capability and then stick to it
What are you, as founders, fundamentally great at? Are you experts in machine learning? Have you refined a capability of making complex interfaces seem really easy to use?
Your core capability is almost always something you bring to the table *before* you write a single line of code or put a single piece of MDF into the laser cutter. New companies ‘consummate’ when entrepreneurs get frustrated at a repeated problem they feel they can solve. And the reason they are even capable of creating a business in the first place is because they know something most don’t, or can do something most others can’t.
Being incredibly self-aware of your core abilities allows you to create things many people feel are ‘impossible’. It makes you stand out. It makes you investable. It makes you remarkable. By defining, and then embracing this core capability, you are always differentiating and enhancing something others are often too far behind to replicate.
2. Don’t make products, make solutions
It sounds obvious when you read it, but often, entrepreneurs spend a lot of time developing a product without iterating how to solve the very problem they set out to solve in the first place. It is akin to Tesla creating a beautiful car with the most amazing auto-piloting GPS system, and having the car air-lifted by a fleet of Amazon drones direct to the customer for that ‘awe inspiring’ look and feel – but having that car powered by 10,000 AA batteries from Superdrug.
The first real major step in any startup is what we call problem-solution fit. This is the point in your development where you have hacked together a repeatable solution to a problem of commercial value. The product is almost always ugly, distressing to CTOs, and paints your face red with embarrassment when chatting to potential investors. But, the fact is, you’re solving a problem of commercial value. Businesses do not survive without defending its ability to create commercial value.
So, productising is the process of putting replicable ‘wrappers’ around a technology or solution for that solution to be replicated, delivered & marketed efficiently. When you have a product, you are iterating the delivery method as much as the solution inside. Let’s take Tesla again. The core problem they have (somewhat) solved, is delivering sustainable electric power affordably. They wrapped this solution up in a product called a Car. However, iterating your product is pointless until you understand which ‘market’ fits the early product you have created. You’ll otherwise spend countless hours designing against a lack of customer feedback or repeat business. You’ll otherwise forever be pushing your product on Facebook without ever knowing whether a $0.50c cost-per-click is any good.
You will know you have achieved problem-solution fit when more than one user (or the same user) has their problem solved more than once using the same solution. When this happens, the ‘market’ that consumer belongs to will begin to share that solution with others who have similar or the same problems. If they don’t, you must ask yourself whether the problem is commercially valuable. Look out for these signals, and when you see this ‘organic growth’, that is the point by which you start refining the delivery of your solution and productising how the user experiences the product.
3. Don’t sell your product – sell the value your product generates.
Okay – this one is a biggie, and I usually spend entire 90 minute lecture on this part alone. But… I will attempt to condense…
Almost every early-stage company has too little credibility to sell. You’re simply too small and too insignificant for anyone to care and therefore, if a sales opportunity presents itself, you must put together a defence that your customer may actually believe. It must be defended using data – not anecdotes or opinions. And the data needs to be robust and convincing without you being there to explain it.
There are three ways to defend your core capability when you are a startup. Attempting to defend your product when you are this early will result in a rather long and tedious ‘umm… maybe later’ from your user or customer. In a startup, you are defending your abilities in one of three ways: fundraising, partnering, or transacting.
Fundraising is a sale whereby your customer gives you capital, and you give them – what appears to be – absolutely nothing (“Hey?! My equity isn’t nothing!” said the entrepreneur. “Umm…. Yes it is, otherwise you’d get a loan.” Says I).
When you raise money, you are fundraising. You may be selling your equity (or CSR if you’re a charity) but what you are defending your sale against is something totally different: brand positioning. As a startup you will likely have access to a market, audience, or network your customer doesn’t (therefore startups in accelerators have an edge in the early-days). Defending your affiliation to that resource allows you to ‘sell’ your untested or unproven product without relying upon that product being perfectly fitted to the market.
Partnering is a sale where a customer gives you capital, and you do some kind of ‘work’ with them in order to integrate your product or solution into their offering in some way. Naturally, as a startup, you likely can’t prove anything about how impactful you will be to their business (no matter how much you pitch and squirm). You can promise the Earth, but frankly, you can’t prove it. However, when you partner with a customer, you can defend something else: your ability to learn flipping fast.
You’re essentially defending your sale with your ability to generate knowledge and IP. This is what you must codify and quantify for you to stand out against the multitude of other startups vying for their cheque book.
Transacting is a sale whereby your customer gives you cold hard cash and you give them something to use in your absence. Much like ‘purchasing Salesforce’, you give them tonnes of money and they give you what appears to be a headache. But unlike Salesforce, you cannot prove your product will be ‘easy to use’ or ‘save time’ as you have too few customers to leverage against. But you may be able to defend your product’s ability to generate profit while it is used. It is hard to sell this way early on as you will need real data around revenue and costs of your user to defend this. But, if you do have that data, no other information really matters.
4. Don’t be afraid to fire a customer
The idea of firing a customer often terrifies entrepreneurs. One of only two of your total paying customers may be whining like a banshee or redesigning your product like they’re Picasso. This can be infuriating and even lead you down a path to creating a business you fundamentally do not care about.
But, be intellectually honest with yourself for a moment – do people care about you enough that if you stop working with someone for whatever reason, you will never ever be able to show your face at a conference in your industry ever again? Highly unlikely for that to be the case. So, if you have a ‘bad egg’, say goodbye respectfully and politely before it kills your product or business.
I hope this helps. I always value feedback and like to iterate the way I deliver my opinions to others. I am on a personal mission to prove talent is simply a mindset and intelligence is simply an attitude of learning against failure. I can only refine and improve this message with your help and feedback.