To be honest, Vinay did a great job pushing me for details with a healthy skepticism to what I was saying. This dynamic turned or conversation into a good interview, highlighting on the ins and outs of the Launch Tomorrow method as it now stands. And also how it's different from both Lean Startup and online direct marketing, when looking at growth.
The Predictable B2B Success podcast
We cover a lot of ground including:
Why the Hero Canvas exists
Why there is so much focus on the customer segment at the super early stage in the Launch Tomorrow method
Why you can't separate the product from marketing, especially when first starting out, and what connects them
How to prioritize in the super early stage when you are probably feeling most overwhelmed
Why founder-market fit seems implicitly obvious, yet often overlooked (including a case study of what that means)
Worth a listen regardless of whether you’ve just found Launch Tomorrow, or following it for a while. This podcast episode is good listen, as are many of the other episodes on Vinay’s podcast.
Back in the day, I was looking into entering the weight loss market with a SaaS solution or coaching services. In theory, it sounded like a great idea. I based it on a “signature success” story of my own. Based on that success, I thought I could provide value, help others achieve the same. But I overlooked the importance of founder market fit.
What I didn’t consciously realize was that most of that actual market was very different from me. I was a young, somewhat nerdy guy, the type of guy who got excited about techie stuff and spreadsheets. And that’s how I achieved what I did in the context of weight loss.
Hmm…business opportunity?
At the time, you could easily buy paid Google advertising. It was a learning environment where I tried a lot of the techniques that are now part of the Launch Tomorrow method: driving traffic to landing pages, getting sign ups, interviewing customers and gathering surveys, and using it all to pre-test and build up a marketing message. Use spreadsheets and numbers to figure it out. After some desk research, I put up a survey and bought google ads on keywords related to weight loss.
But the weight loss market, the people who were actively spending money and trying to change the fact they were overweight, were women roughly twice my age. Even though being overweight equally affected both men and women across the age ranges, the _market_ was very different. The ones willing to spend money. After doing all this market research, I realized my survey responses mirrored market research reports. Roughly 90% of the market was female. Not 50-50, as I implicitly expected at first. Then I connected the dots that 89% of the survey responses were from women twice my age living in small towns.
Weight loss market breakdown
Given that was true, I was at a natural marketing disadvantage right from the beginning because I was harder to relate to:
I’m not a doctor and I’m not planning on going to medical school just to look credible
I’m not a woman. While I love the women in my life, I’m not planning on becoming one for the purposes of this startup idea.
My approach of apps and spreadsheets wouldn’t have naturally appealed to this market anyway, so they were likely to struggle with my process and not have it solve the problem.
It would have been a hard sell, and also likely to be less effective than it was for me. I’d lost faith that I’d be able to achieve results sustainably for this market once I realized the nature of the market. These natural disadvantages I had in this market were ones that I couldn’t easily change about myself. Best to cut my losses and get out. Founder-market fit wasn’t there. In this case, it had marketing implications for me as a as a founder and being perceived as a relatable expert entering a market, even though I knew my process/product was effective. It was a great market, just not a great market for me to enter, at least as a solo founder.
Hence the importance of “founder-market fit”
Josh Kopelman, co-founder of First Round Capital, posits that:
6/ Most founders spend <5% of their time on idea [market] selection, yet I believe that “the pick” accounts for >50% of startup success/failure 7/ Observation #1) Many founders rush “the pick”. If you’re spending the next 5-10 yrs of your life doing something, pick your idea wisely.
Choosing the right market to pursue is one of the key decisions an early stage founding team makes. Even though there are a lot of considerations, fortunately you can iterate to the right combination for you and your team with systematic testing. And the founders themselves are an important part of that decision, which they often miss (as I did above).
The startup world bandies around the term “founder/market fit” (FMF). Founder/market fit: the founders have a deep understanding of the market they are entering. They have relevant knowledge, skills, and experience. Besides that, they have strengths or characteristics. Ultimately, these founder factors help them gain a natural competitive advantage. Build a moat. Theoretically, anyone can test a market test in the abstract or hire an agency to do it for them. But there are markets which a specific founding team will be more likely to succeed in, based on founder/market fit.
And as venture capitalist Chris Dixon says, founder/market fit can serve as a leading indicator “of whether a startup will achieve product/market fit”. Successful founders use their experience to prevent premature scaling. They find it easier to test a value hypothesis using customer discovery, because they have ready access to customers.
About to start a greenfield project?
Have Launch Tomorrow run an in-house "riskiest assumption workshop". Remote delivery options also available. Discover where to prioritize your validation efforts, to get to market fast.
There’s three major reasons why getting founder-market fit right makes a difference:
Strongly tied to how founders expect to acquire customers
Choosing a high growth market
Getting the right founding team composition for your business model
Strongly tied to how the founders expect to acquire customers
Here’s why: founders often default to what they know. They expect to acquire customers from market segments they can reach easily, especially if short on time. And if a segment fits well, growth is easier to execute. If founders can build on pre-existing contacts and specialized knowledge, for example enterprise purchasing processes, this can be a major feather in their caps. At least compared to founders who are green. The marketing and sales knowledge in particular is important, particularly in relatively established markets:
Create an explainer video for your complicated new product.
Make sure your audience understands it, without being overwhelmed by technical details.
Often new ventures can operate in the same domain as previous experience (i.e. founder-market fit), but the way customers are acquired is different. For example, elephant-hunting enterprise software sales leaders aren’t really a good fit as self-service hosted software founders, even if the core business software vertical is right in their wheelhouse. A killer paid online acquisition guru isn’t a good fit for a venture which requires fostering an open source community for adoption. And sometimes domain expertise can’t be relied on at all when markets are entirely new it’s much more challenging to have founder-market fit for a VR startup when the category didn’t meaningfully exist a few years ago. However, you can still have founder-go-to-market fit in an emerging or entirely new market because the methodology for customer engagement can rhyme with what founders have done in the past. (genuinevc.com)
Ditto on the consumer side. Someone with experience in a particular industry will sense patterns, how marketing works in that space. And also will have industry friends who can help, if needed.
You need not commit up front. Before you know anything. Which is also why it’s best not to obsess over the choice. There are techniques like Justin Wilcox’s now classic SPA scorecard to help you get out of the building and to start speaking with prospects. The customer discovery process will not only tell you a lot about the prospects but also about your own ability to acquire them. If you can’t acquire customers for interviews, how are you going to build a high growth business in that market segment?
High growth markets will buoy up the business
If you are entering a new business, there are several potential approaches. The most “long-term” approach to starting a business is to enter a market hockey-sticking into a high growth phase:
You usually sell based on the merits of your offering, not being forced to steal customers away from the competition.
A significant portion of your sales will happen due to market growth, i.e. new people or companies actively looking for a product like yours.
A good heuristic for market entry is the Star Principle from BCG’s matrix, as described in Richard Koch’s book of the same name: aim for a market leadership in a high growth market with new products
From a practical perspective, Steve Jobs used the term “markets in ascendancy” to prioritize product ideas for launch, for his approach of introducing a well-designed alternative to other products in the category
If you take this criterion of growing markets to heart, you significantly increase your overall chances for success. Many of your potential product ideas won’t pass this criterion. Filter them out at the beginning. You’re left the ideas which have better shot at high growth. You buy market share at a discount.
It also means the product is likely to be around for longer. Demand for a new product tends to be highest at the beginning of its life-cycle. If the demand is growing, it’s still early days for the product category.
Founder core competencies are surprisingly a strategic decision
In a small business single-owner scenario like my weight loss one, the founder’s strengths and weaknesses matter disproportionately for a given market. Yet tech startup investors like Paul Graham (@paulg) advise having multiple founders. Each with different relative strength. That strength can come from experience, background, personality, or some other source. This co-founder owns a function in that startup, where they are naturally strong. In addition to playing to cofounder strengths, this approach divides up the seemingly endless workload with accountability, both among themselves and also to the external world. Each relative strength maps to a “key activity”. The key activities box (on a @strategyzer business model canvas) defines how you deliver the value proposition:
The key activities box on your business model canvas
The basic principles is: one founder per key activity. Depending on exactly who you have in your founding team, you’re much better equipped to go after different markets.
For example, you’ve invented an IoT device for agriculture. It gathers data about weather and soil conditions. The obvious starting point is manufacturing and selling devices. But is that your best option? For example, you can give the device away, yet sell services and data. Use machine learning or statistics based on the data that the devices gather. If that’s the case, then you need data expertise in your founding team. The main technical person is ideally a machine learning and software specialist, as opposed to a hardware manufacturing expert.
In these scenarios, a market opportunity exists. You just need appropriate people, each with a different strength. One in each part of the business. To deliver. And ideally each expert trusts the decisions made in other areas. To move fast as a company. Your competitors operating in the same market will also be trying to achieve the same. Your ability to deliver is often a differentiator.
What about industry outsiders as successful founders?
For every founding team who bring a wealth of experience to a successful startup, there is a story of a founding team industry outsiders. They go on to raging success. They bring a new perspective, and as a result, they notice opportunities that incumbents take for granted. The sacred cows aren’t sacred to them. Often, they don’t know any better. Or they deliberately go contrarian.
For example, Laura Behrens Wu is the founder and CEO of Shippo, a logistics and shipping software platform for e-commerce merchants. Laura had:
no technical background so little intuitive understanding of her technical audience.
never worked for an e-commerce company so did not have the domain knowledge to understand their needs which would come naturally after years of living in their shoes.
In short, she was an outsider.
Yet according to @bussgang, Wu has navigated Shippo to becoming one of the leading online shipping platforms in the world, with 80 employees and $30 million raised from top investors such as USV and Bessemer.
These startups are often the outliers in terms of growth, as they are systematic with testing and discover opportunities that everyone else misses. They don’t know industry best practices, so they set out to discover and form their own.
Or like the case of AirBnB. First they ignore you.Then they ridicule you. And then they attack you and want to burn you. And then they build monuments to you. This is a much harder and more expensive path, but also significantly more lucrative when you create a new product category—and proceed to lead it.
Summary
In short, pay close attention to the market you choose. This one decision can significantly affect the outcome of your startup journey. Fortunately, you can iterate and learn; however, many founders miss the strategic importance of this choice, particularly with respect to the composition of their founding team. It’s also a decision you need to need to commit to early on, so dithering too long can also have unsavory consequences for your business.
Essentially, either your founders need to be capable of generating rapid growth within a well established vertical, or be willing to create a new vertical. This is true from a marketing perspective, but also from an operational perspective. Both require specialized knowledge in many industries. Founder-market fit ultimately ensures you can deliver a meaningful experience for that chosen market.
Key Takeaways
Being similar to your market is a marketing asset, particularly in consumer markets
Experience selling to your initial market segment can help, depending on how appropriate that sales experience is to the new product
Founder strengths map to key activities in your business model, thus an important link in founder-market fit
When creating a new market or market category, previous knowledge of industry “best practices” can become a blind spot instead of helping
Recently I’ve been revisiting the launch and pivot process in my research, in an effort to help founders and innovators change strategic direction in their business. Here is an old piece I wrote that should give you concrete metrics to track your progress. These were specifically chosen to be relevant, independently of what budget is available (and thus hopefully make it more relevant nowadays.
VCs and startup investors often say they’re looking for hustle in early stage founders. But that feels vague. And honestly, on its own, it’s not particularly useful feedback. More of a sophisticated way to end a pitching session they don’t want to be hearing.
Until now.
There are a few leading indicators you can use to keep yourself accountable, and to make sure you actually are hustling (and you’re not falling for your own PR).
The following four operating metrics say a lot about an early stage startup’s chance for success.
1. Number of pitches
A critical leading indicator metric of early stage success is how many pitches are you making each day (even if you aren’t trying to sell)? By “pitch”, I mean any attempt at asking someone for something, even if it’s just information. For example, this could mean approaching prospects for customer discovery or customer development interviews.
If you are making them, then you are learning more about your audience and iterating towards something that is likelier to work. Also, you are converting some people, which means that you can then continue to build on that as time goes on. This includes:
both outbound pitches, whether for sales or for customer interviews,
inbound marketing, such as free content you create which you need to put in front of your target audience.
advertising (impressions)
With inbound, unless if you already have an audience, usually requires some form of gatekeeper pitching or payment. You to pitch media owners, journalists, editors to get coverage. Or you create content and just pay for advertising.
And then pay attention to any response you get.
At some point after you’ve done this for a while, you’ll know what people want and how to reach them and roughly how to sell them. At that point do it yourself a little bit and then it makes sense to delegate it to a professional salesperson to improve your closing ratios (if you need one).
That’s actually a pretty good metric, because it’s a leading indicator for all learning. And learning is the #1 goal of startup, in order to stop being a startup, and to discover a business model which works.
Notice how I’m not really including the “number of failures” or “failing fast”. That’s repeated so often in tech circles it’s become hollow and meaningless. I think being able to deal with rejection is possibly more important than being able to deal with “failure”, certainly in the tech startup world. Because even in technology the most important decisions that affect your startup or are made by people (customers, prospective co-founders, prospective employees).
About to start a greenfield project?
Have Launch Tomorrow run an in-house "riskiest assumption workshop". Remote delivery options also available. Discover where to prioritize your validation efforts, to get to market fast.
To be fair, not every founder is a natural salesperson. But every serious founding team needs to be willing and able to face lots of rejection in order to go after their vision. In fact, the number of rejections a founder is willing to take is a good measure of how strongly they believe in their vision, product, or goal. If you have a goal you believe in, but you’re only willing to be rejected 10 times before you give up on it, you can easily end up being a genius in your own mind but giving up almost immediately once you start doing anything related to marketing.
2. Number of experiments
Another related metric is how many experiments are you running each week? If this is not at least 1, you are not going to get very far. Or other startups who are will run circles around you. Or you are trying to cram too much into one test, not really telling you anything useful.
Create an explainer video for your complicated new product.
Make sure your audience understands it, without being overwhelmed by technical details.
This is more of a product or operational metric. Basically, the more thorough and organized you are with this, the faster you will learn what you need to know. It never ceases to amaze me, how documenting my own hypothesis and metric before running an experiment is very useful, when interpreting the result. Because it’s so easy to twist the results into what you want them to mean.
Most of the major technical breakthroughs result from lots and lots of experiments. They explore an area or technology with a lot of unknowns, including “unknown unknowns”. That’s why they’re surprising for everyone outside the founding team. Here’s a breakdown of roughly the number of experiment trials required to create a certain type of invention, based on patent filings.
numbers of experiments needed to achieve a breakthrough product
While this looks only at technology, the same principle is true in the case of proving the business model and finding a growth engine. By focussing only on tactics, you end up using exactly the same tactics as everyone else. So if everyone is reading the same 3-4 sources for ideas and trying exactly the same tactics at the same time, the tactics tend to quickly become useless. This the law of shitty clickthroughs happening–one growth hack a time. It’s so difficult and yet so vital to differentiate, if you are using exactly the same tactics as everyone else in your industry. Growth or business level experiments, and lots of them, are the only way to really discover an effective way of growing a startup.
Also, if you aren’t running any experiments, you are only delaying “learning moments”. And if you do ultimately fail for one reason or another, it’s because you’ve delayed so many “learning moments” for so long, that reality comes crashing down on you. And usually this results in the Dunning Kruger effect. You are just clueless, and being confident in what you’re doing only makes it harder to discover you are actually clueless. It’s also a different way of looking at cycle time, which is an important indicator for people like Sam Altman of YCombinator.
3. Back to basics with customer empathy
Many of the pivots required by the crisis require a change of customer type. Or at minimum a focus on a particular niche that currently have a lot going on. Like hospitals. Or Supply chains. Or Agriculture and food.
In that context, do you really understand your audience as well as they do themselves? Do you know their needs? Wants? What they dream about at night? Who they’re influenced by? What questions they have? What media they consume? What they typically do? What obstacles they struggle with?
Do you as the founding team empathize with the customers? Do you gather and systematize data on what they say and how they behave (as an indicator of subconscious needs)? Do you have a system for doing so, like Adrian Howard’s iterative personas and/or a hero canvas?
If you really have this covered, it will help you build something people want. It will help you do channel testing to discover how to reach them cost effectively. It will resolve many types of conflict among your own team, if you agree to formulate a test, and then gather data to prove which approach, option, or decision is right.
Your entire business model depends on it.
Most frequently, either founders aren’t aware of how important this is, or if they are, they only use this if they think it will further their own agenda (for example improving the user experience, regardless of the wider business context).
4. Goal setting and delegation
Probably another really big one is lame goal setting as a founding team, which impacts your ability to ship anything, particularly at the early stages. Knowing what you want to accomplish and giving your team deadlines. This is kind of related to:
succumbing to distractions (bight and shiny object syndrome)
indefinitely being stuck in learning mode
inability to delegate work.
Drifting along indefinitely is not good. And this is often left implicit, avoiding difficult discussions, and ultimately festering and resulting in things like cofounders leaving, etc.
If you really want to build a startup, at some point, you need to finish stuff as well as just learn. Which means you always need target completion dates, or at least timeboxes. In the early stages, these will tend to be very tactical and short term, because you are learning and you don’t want to commit to a “five year plan” if you don’t have any reason to do so, like revenue or traction.
Even if it means have a clear goal of what you want to accomplish in the next 2 week sprint and what that matters, that will help a lot. And also having everyone on your team agree that this is your goal, and how you will track it (so that it is objectively observable).
Admittedly, at first your only goal is to learn. But shifting slowly into execution mode, is inevitable as you start proving parts of your business model.
Most of the internal problems that I see with early stage startup founders boils down to variations of one of these four factors.
Key Takeaways
The 4 key areas to achieve a successful pivot during the lockdown are:
Number of pitches or contact points with new customers
Number of experiments you are running
Revisiting your customer segments and re-establishing empathy
Setting clear goals you and your team can work towards
