Sometimes the best advice is "stop doing that and move on"
Product & Startup Builder
Filtering by Category: Strategy
On Revenue vs. Scale, Helping Incumbents vs. Disruption.
Revenue vs. Scale
One of the biggest challenges many young startups with global disruption ambitions face is an addiction to revenue.
In the early years, a startup’s job is to grow - fast - not to make revenue or profit.
This might sound counter-intuitive. So let me explain.
An undue focus on customer revenue forces you to pay too much attention to what your first paying customers ask you to do for them for fear of losing them (and your only source of cash). These are often feature requests that might be good for their business, but not necessarily good for yours.
Why? Because existing customers will typically ask for advanced features designed to solve more and more of their particular needs. These needs are often either very specific to the quirks of their operation or are very hard to polish and scale. Making things worse, the requests also tend to come thick-and-fast meaning that you end up developing a broad product surface area without taking the time to really polish everything that’s getting built.
Even with amazing product discipline (where you are translating each specific ask into carefully designed, future-proof and generic product capabilities), it’s very, very difficult to avoid falling into this trap when you are capital constrained and dependent on revenue. 9 times out of 10 it will ultimately be massively distracting, undermine your focus, create overstuffed products and stunt your business growth. It can, and often does, kill your company.
Instead, high-growth startups typically need to raise enough capital to invest in growth without being beholden to the needs of any particular customer or customer segment.
This typically means focusing on a number of key things. They include…
A focused product that initially does only 1 or 2 things really well
A clear marketing message delivered on a beautiful website
A polished self-serve onboarding funnel with standardized pricing
UI and UX that is simple and clear to understand for new users
Well oiled operations (sales, support, biz dev etc)
Referral and viral mechanics
With these features (and many others) you will hopefully be able to win and onboard many, many customers quickly.
Why is quantity better than quality? Because making software is relatively easy. The world is littered with small-scale software projects that were essentially custom-built for a few customers. That’s not building a high-growth startup. That’s building a small software business. The hardest thing in the world is getting broad (even monopolistic) adoption of a product by a whole category of users. It’s hard, therefore it’s valuable. Once you have that market position, you have a captive audience to which you can up-sell and cross-sell a range of new features (with attached fees & charges) over time.
Helping Incumbents vs. Disruption
Another important (and often overlooked) aspect of reducing your focus on revenue is that it allows you to consider disrupting rather than partnering with incumbents. It’s very easy to make the decision to run to big customers and partners to try to get big money and/or lots of distribution. However, oftentimes, a tech startup should be killing - not helping - some of the legacy players in an ecosystem. Or, at the very least, forcing them to play by new rules. This is the very definition of disruption.
To be even more concrete: Often times your first instinct will be to build some great b2b software for the existing players in a market where, perhaps, instead, you should be building a direct to consumer alternative to what’s gone before. A clear example of this is Uber. They didn’t build dispatch software for Taxi companies. They built a new kind of mobility business that dealt directly with riders and drivers - making Taxi companies obsolete. Had they tried the other thing, the story would have gone very, very differently.
Execution Is Not All About Action
One of my colleagues on ‘execution’:
“People always hear that execution is everything in startups.
The problem is that they think “execution” is all about more action. But that’s like an amateur running onto a pro basketball court and running around throwing the ball in the air.
Execution is about getting the ball in the hoop and all of the skill, experience and muscle memory it takes to make that happen”.
6 Things To Avoid As A Young Startup
As a young startup, the things you must avoid include...
Biting off more than you can chew
Protracted timelines/scope creep that can blow out
Over engineering your solution before you know what your users really need
Vague requirements
Poor/miscommunication between stakeholders
Over promising and under delivering
This is why MVPs and strong cross functional process is essential.
Reminder: If your problem is getting from A to B then the MVP is a skateboard (then a bicycle, then a motorbike, then a little hatchback, then a sedan, then a Porsche), not 4 wheels.
Product Prioritization Through Clear Vision
“Given that we have limited resources, what would you say is more important, that it looks good or it's technically accurate?"
As the product manager, your job is ultimately to make it both. The trick is to break the problem down into discrete product "moves" such that each move is both beautiful and functional.
The process is not to figure out what resources you have and then work backwards to something you can ship. Your job is to figure out what you believe the user needs and figure out how to marshal your resources to get you there.
Usually, that requires you to create a shared purpose and mission for your team, a reasonable roadmap of discrete releases/moves and the discipline and focus to keep everyone's eye on the prize.
Enterprise Sales is Hard But Sometimes Essential
Enterprise sales is very, very hard. But if you can build a team of strong people, process and pipeline it can be a real competitive advantage.
Platforms: Show Me The Money!
Show me the money!
Devs (especially top 50 apps from FB to Eventbrite) care about new users, re-engagement and money.
Unless your platform is solving fundamental technical challenge like SMS, Voice/Video etc (i.e. you're offering "nice to have" features) you need to demonstrate - in as concrete terms as possible - how you are going to drive new users, more sessions or more money for the developer.
Capital NOT Revenue
High growth startups are about raising capital & burning it. Not making revenue & earning it.
How Did Uber Scale So Fast?
My friend just asked me how Uber scaled so fast. My off-the-cuff answer:
Huge ambition/vision/appetite - this animates and motivates everyone and everything
First principles thinking - this leads to ignoring legacy constraints and encourages new innovative thinking/solutions
Fearless execution with ownership/accountability at the edge - which allows everyone to move fast without waiting for permission
I’d also add...
Bias towards action - move fast. Have the meeting this week, not next week
Hire strong operators that, in-turn, hire strong operators.
Of course, these are some of the same things that got it in trouble too.
Ask For The Right Amount Of Funding
Investors have limited bandwidth and a chunk of capital they need to put to work.
Don’t try to minimize your funding ask thinking it will be easier to get a “Yes”. You need to be asking for the right amount of money to put you on a trajectory to win your category and get a 100x return on their bet.
Anything less than that is uninteresting and comes across as naive.
You Can’t Be Everything To Everyone
You must choose a minimum viable customer and build a killer, habit forming product for them. Then, and only then, can you incrementally expand to other use-cases and market segments.