Doing only the things relevant at the stage you are at

What your to-do-list con­sists of, and what your met­rics for mea­su­ring progress should be, depend great­ly on the sta­ge (see article on sta­ges) you are at. If you spend ener­gy on a task that should not be on your prio­ri­ties, it is coun­ter­pro­duc­ti­ve. It can be even let­hal. No mat­ter how good or hard wor­king you are.

Very few acti­vi­ties done in star­tups are inhe­rent­ly wrong. They might be exact­ly right – for someo­ne in a speci­fic situa­tion. But are they right for you, right now is the ques­tion.

A com­mon example of this is pre­ma­tu­re sca­ling  - the #1 cause of star­tup death. The acti­vi­ties being per­for­med can be exact­ly the right ones – for someo­ne who is rea­dy to sca­le. But if you are not, you may com­mit a suici­de as a result.

A rela­ted topic is, what should be the key indica­tors of your progress. If you are in PMF sta­ge trying to mea­su­re Cus­to­mer Love, think what is a good proxy for that? You get what you mea­su­re, so pic­king the right indica­tors for each sta­ge is impor­tant.

  1. Iden­ti­fy the sta­ge whe­re you are at and what should be on your to do list accor­dingly
  2. Iden­ti­fy the right indica­tor to mea­su­re your progress towards your next miles­to­ne

Shor­ta­ge of time is your big­gest obs­tacle - spend it wise­ly

Time is the big­gest shor­ta­ge star­tup has. So you need to spend your time doing right things at right time - otherwi­se you hours will be was­ted on doing somet­hing that could have been done on later date.

One of the les­sons I lear­ned whi­le ent­repre­neur was: You can spend your time doing things right (cor­po­ra­tion) or right things (star­tup) !

Bad Execution or Bad Assumptions ?

You have a plan, you execu­te but the results (such as sales) are not the­re. What’s the problem? Bad sales­guy, so fire him and hire a new one ins­tead? Or could the problem be a more fun­da­men­tal one: is your plan wrong, or more preci­se­ly, the assump­tions your plan is based on are wrong?

Result = plan x execu­tion. It’s not always obvious which one is wrong. Both could be. But for star­tups struggling with sales, the big­gest issue is typical­ly not about sales execu­tion (it might be subop­ti­mal, but not the root cause). It is like­ly to be a product/market fit issue. Or even more fun­da­men­tal, problem/solution fit issue. If the­re is no real oppor­tu­ni­ty, not even the best sales­guy can get a deal.

In most cases, rat­her than rota­te through a num­ber of sales­per­sons, you should go back to your basic assump­tions about the mar­ket, cus­to­mers, their needs and expec­ted beha­viour. You pro­bably have mis­sed somet­hing. Learn from your expe­ri­ments, adjust and then try again.

Experimenting vs implementing

Cor­po­ra­te way of thin­king: We care­ful­ly pre­pa­re a plan. Then we imple­ment it preci­se­ly. The results will be as sta­ted in the plan. Fai­lu­re is due to bad execu­tion.

Star­tup way of thin­king: My plan is not real­ly a plan, it’s just a sum of my hypot­he­sis. For sure it will be wrong but I don’t know whe­re and how. I need to run lots of struc­tu­red expe­ri­ments to test my hypot­he­sis. When I have vali­da­ted my assump­tions, I may have a plan that is worth somet­hing. Fai­lu­re is due to not run­ning enough dif­fe­rent “tests” with cus­to­mers.

Many star­tups beha­ve like cor­po­ra­tes in this regard, assu­ming their plan will work – just throw in money and people and voi­la. No. Be very awa­re that until you have vali­da­ted your assump­tions you do not have a plan. Then you can not be imple­men­ting a plan (read: sca­ling), all you can do is run expe­ri­ments.

The result of an expe­ri­ment is to inc­rea­se your know­led­ge – does this work, Yes/No. The job of a star­tup is to run expe­ri­ments. A good star­tup learns a lot whi­le spen­ding very litt­le effort and money. A bad star­tup spends a lot and doesn’t learn much.Cost efficiency of your lear­ning should be a key objec­ti­ve whi­le in the expe­ri­men­tal pha­se (=all pha­ses befo­re sca­ling, by which time you should have a vali­da­ted plan you can just imple­ment). Cost efficiency of run­ning your ope­ra­tion should be your key objec­ti­ve once at the sca­ling pha­se.

How do I know if I have product/market fit ?

The­re are no strict rules for that as the who­le PMF concept is somew­hat abstract and vague. But the­re are (semi)objective ways to assess it. What exact­ly works is depen­ding on the con­text so you need to iden­ti­fy the rele­vant cri­te­ria for your case.  Howe­ver at the end it boils down to this (by Eric Ries)

If you have to ask if you have found it, you haven’t.”

Some things to monitor/measure that are indica­tors of PMF (more preci­se­ly, the “cus­to­mer love” or “mar­ket pull” part of PMF):

  • A wide­ly used mea­su­re is pro­vi­ded by Sean Ellis, who coi­ned the term Growth Hac­king. He sta­tes you’­ve reac­hed Pro­duct/­Mar­ket-Fit when at least 40% of the res­pon­dents answer the ques­tion “How disap­poin­ted would you be if this pro­duct no lon­ger exis­ted tomor­row?” with “Very Disap­poin­ted”.
  • Is Word of Mouth hap­pe­ning? Are your cus­to­mers tel­ling about you to 3rd par­ties, with no invol­ve­ment from you, which results in win­ning new busi­ness?
  • Do you get inbound leads that you can not track back to your own acti­vi­ty?
  • Are cus­to­mers trying to buy befo­re you even tried to sell?
  • Are your sales cycles get­ting shor­ter?
  • Do cus­to­mer requests gene­ra­te so much workload that you have no time to pur­sue your own deve­lop­ment ideas?

Our own for­mu­la­tion of a lit­mus test to deter­mi­ne whet­her the­re might be PMF:

Pro­vi­de evi­dence of 3 sepa­ra­te mea­su­red tests of your cus­to­mer beha­viour that demon­stra­te your product/service is sig­ni­ficant­ly (=order of mag­ni­tu­de) bet­ter than the exis­ting solu­tion.

Pro­duct Mar­ket Fit is when cus­to­mers sell for you”.

Glim­mers of fal­se hope is not the same as cus­to­mers wan­ting to rip it out of your hands. Pro­duct Mar­ket fit feels like a land­mi­ne going off.” Peter Rein­hardt

The num­ber one problem I’ve seen for star­tups, is they don’t actual­ly have product/market fit when they think they do.”Alex Schultz

80% of SaaS com­pa­nies never make pro­duct mar­ket fit.” Peter Rein­hardt

Star­tups need 2–3 times lon­ger to vali­da­te their mar­ket than most foun­ders expect. This unde­res­ti­ma­tion crea­tes the pres­su­re to sca­le pre­ma­tu­re­ly.” (Star­tup Geno­me Stu­dy)

You are able to articu­la­te your dif­fe­rent problem/solution fit(s) in detail”.

Befo­re you can achie­ve product/market fit, you need to unders­tand and be able to articu­la­te your problem/solution fit(s) in detail - not in “gene­ric” level or in gene­ric terms (https://gorillacapital.fi/problem-solution-fit/).

Stages of startup development

A star­tup is like a new­born baby. The deve­lop­ment of a baby always fol­lows a cer­tain sequence: learn to eat, get the diges­tion sys­tem going, then craw­ling, wal­king, tal­king, run­ning, rea­ding, wri­ting etc. The first clo­se to 20 years of a human life are spent on just lear­ning the skills nee­ded to be a real, adult human being. And it always hap­pens in a cer­tain sequence.

You don’t expect a 2 year old to be able to run a marat­hon, nor a 2nd gra­der to apply for a uni­ver­si­ty.

Star­tups do fol­low a simi­lar kind of a deve­lop­ment. But that is poor­ly unders­tood (or accep­ted), resul­ting in “2nd gra­ders trying to get into a Uni­ver­si­ty, with the help of a rich dad” – in star­tup par­lance known as “pre­ma­tu­re sca­ling” (usual­ly fuel­led by foie gras fun­ding).

Human babies and star­tups ali­ke should focus on deve­lo­ping skills that kids of their age are meant to. Even Wun­der­kinds who have special skills and are fas­ter lear­ners than most have to fol­low the same sequence, they may just advance fas­ter.“The Star­tup J Cur­ve” by Howard Love defi­nes a 6 sta­ge deve­lop­ment process a star­tup has to go through, in sequence, to make it to the finish line. A brief sum­ma­ry of the sta­ges can be found here

https://www.startupgrind.com/blog/the-startup-j-curve/

Eve­ry star­tup should iden­ti­fy their place on that cur­ve, and unders­tand what should and SHOULD NOT be on their prio­ri­ty agen­da whi­le at that sta­ge. And when are they rea­dy to move to the next sta­ge.

One way to look at the sta­ges is as a star­tup Foun­der to do list:

  1. Pro­vi­de evi­dence that the­re is a real busi­ness oppor­tu­ni­ty with real problem worth to sol­ve. (problem/solution fit)
  2. Pro­vi­de evi­dence that a) you can build a pro­duct that does the job (pro­duct) b) you can find a mar­ket seg­ment that loves your pro­duct (mar­ket). (product/market fit)
  3. Pro­vi­de evi­dence that you can build mea­ning­ful busi­ness. (busi­ness model)
  4. Pro­vi­de evi­dence that your busi­ness is sca­lable. (rea­dy to sca­le)

You should move to the next item on the list only when you have tic­ked the pre­vious off. And expect to do a lot of ite­ra­tions – one step forward, half a step back. Some­ti­mes all the way back to squa­re 1.

Problem/solution fit

Problem/solution fit needs to inden­ti­fied & veri­fied prior you can start loo­king for product/market fit or sca­ling. Here is a pre­sen­ta­tion that can help you on iden­ti­fing the problem/solution fit.

Typical­ly ent­repre­neurs feel pres­su­re - both “inter­nal” and exter­nal - to rush to sca­le. Many time even wit­hout unders­tan­ding their problem/solution fit and how it dif­fers between seg­ments.

This results in not fin­ding product/market fit or in inef­ficient and pre-matu­re sca­ling (read was­te of money).

The aim of problem/solution fit process is to be able to iden­ti­fy the best oppor­tu­ni­ty to pur­sue furt­her.

Startups have different stages

Star­tups have dif­fe­rent sta­ges. Howard Love has well articu­la­ted the dif­fe­rent sta­ges and we have inclu­ded the problem/solution fit, product/market fit and sca­ling “fit” for you to unders­tand how the­se sta­ges over­lap each other.

Whe­re is your star­tup ? What are the KPI’s rele­vant for the sta­ge you are in ? Have you “over­lea­ped” one of the sta­ges ? What kind of veri­fica­tion and facts do you have ?

Searching or scaling ?

Is you star­tup still in search mode or are you trying to sca­le ?

Too often star­tup ent­repre­neurs mix searc­hing and sca­ling - which in rea­li­ty are two impor­tant but total­ly dif­fe­rent things. Searc­hing is somet­hing each star­tup has to go through and make own disco­ve­ries. It is typical­ly rela­ted to 1-3 first years of the com­pa­ny, whi­le eit­her in fin­ding problem/solution fit or product/market fit.

Sca­ling only comes and should be done when tho­se both have been found. The big­gest rea­son why star­tups fail is pre­ma­tu­re sca­ling !

Check also https://www.forbes.com/sites/nathanfurr/2011/09/02/1-cause-of-startup-death-premature-scaling/#2d14cf0e1fc9 and https://gorillacapital.fi/stages-of-startup-development/