Milestone Ordering for Entrepreneurs
Honed from many mistakes and wasted money.
One of the hardest lessons I’ve had to learn as an entrepreneur is what to focus on, at which stage. Unfortunately, when I’ve gone out for funding in the past, I’ve had to pitch as if our company were in the future in order to get the funding, and ended up drinking my own kool-aide. I forgot to get the basics right.
Before I go into further ado, here’s the correct ordering I’ve extracted:
- Important Crusade
- Talented Team
- Killer Product
- Market Fit
- Large Market
- Killer Distribution
- Wide Moat
Each subsequent bullet point doesn’t matter until everything above it (the foundation) is in place. The biggest mistakes I’ve made resulted in spending time (> 3 years) and money (> $2 million) on later bullet points before solving the ones before it.
Let me dive in and explain why I’ve ordered them as such, milestone by milestone:
Marc Andreessen talks about this much better than I ever will (only he uses the word “mission”). What you choose as your crusade informs what type of talent is best. When my founders and I started our last startup, we chose the team before the crusade. And ultimately, when we honed in on our selected crusade (LTV-positive growth using machine learning rather than human intuition), we found our talented team had all the wrong talents. It was so, so hard emotionally to part ways, but it was the best thing thing for the company, so we had to do so.
I don’t know anyone personally who has solved this one repeatedly and reliably. However, the only way I know to build a killer product is to find at least one Genius. Where would Steve Jobs have been if he didn’t find Woz? At least for me, if I don’t feel like I’m working with a Genius on my team, it’s time to keep looking, and not worry about building the product quite yet. A team of non-geniuses will have a hell of a time building a killer product, and probably won’t attract other folks of equivalently high talent.
Just like a talented team, a killer product generates an aura-affect. You get talent quicker, funding quicker, and customers quicker; which in turn begets more talent, more funding, and more customers. I have a hard time quantifying, though, what makes a killer product. When you have it, You Just Know It. If you don’t have a killer product, you won’t have that “I Just Know It” feeling in your gut. I wish I could be more helpful here, but if I could, I would also be able to tell everyone how to find their perfect significant other too—because it’s the same exact feeling.
There are killer products without a market fit, but no amazing companies without a market fit. What I’m referring to here is whether or not the vast majority of potentials customers actually realize they want to buy & use your product. I ran into this head-on in 2007 when I created an SaaS reservation/booking platform for doctor’s offices. I found out soon enough that doctors primarily (at that time) cared about practicing medicine better—and would spend hundreds of thousands of dollars on such products—but couldn’t be bothered for 2 seconds (let alone any money) about how efficient front-of-house was. If you have market fit and a killer product, your customers will clamor for your product. No clamoring? No market fit.
If you have a killer product & fit, playing in a large market will determine how much money you can raise, and whether or not your company will have a chance of even considering IPO (a tactic, not an end-goal!). Most entrepreneurs know & understand this; the mistake I’ve made is concentrating on finding the large market before I ever narrowed down what my crusade will be. When you’re early on, you’ll have to do things that don’t scale. If everyone already knows they scale, there likely isn’t an un-discovered opportunity there.
If you look backwards from most successful companies, they all had a magical distribution (or sales) model that few of their competitors had yet discovered. Early apps on Facebook and iTunes found this. But which distribution channel is right for you will be determined by your market fit in a large market. I’ve spent far too many hours thinking about distribution channels before I even knew my ideal customer.
Not every entrepreneur will care about this, but I grew up reading Built to Last, so I care about the legacy my company will leave long after I’m gone. I follow Warren Buffet and writings about him closely, so I know that one of the secrets to ultimate business success is having a competitive moat that naturally gets bigger over time. However, I’ve found that thinking about stuff like this too early will end up as wasted time.
In any case, I hope this helps other striving entrepreneurs to avoid most of the stupid mistakes I’ve made up to this point. If only when I was 13, I knew what I knew now ☺
As an aside: I believe that one of the biggest risks in Silicon Valley in the short term is that the institutions that traditionally invested in A Round & B Rounds are now doing seed investments — only, many of the venture partners haven’t adjusted what they’re looking for during seed pitches. I’ve seen some folks that still look for a scalable opportunities over team & product when evaluating seed investments. To me, that’s the cart before the horse, and I made that same mistake myself.
This issue should correct itself over time; but unfortunately for us entrepreneurs, we only take a few swings over the course of a lifetime. VCs take hundreds of swings. So it’s way more important for us entrepreneurs to learn quickly than it is for VCs.