In search of product market fit for “startup ecosystem building”
So startup founders who do some homework nowadays should know about product market fit, or PMF if you’e big fan of using acronyms.
The recent podcast from Startup School of Y-Combinator covered a little bit but it’s a nice recap on the linkage from minimal viable product (MVP) to PMF, specifically, on how to get the MVP done in minimalist way, talk to the customers who have the problems, and develop product features per founders’ expertise and insights.
I always like to apply what guru said to the startup founders to what I’m doing in this startup ecosystem building program, Taiwan Tech Arena (TTA). The program is 100% funded by the government, providing a nice co-working space in downtown Taipei, supporting startup to link with international market via trade shows and grant, and getting global corporate, investor and mentor network in Taiwan.
First thing about this PMF review is about the problem statement. To me “lacking of startup ecosystem” is a vague problem only inexperience consultant would throw out. A problem, if well thought, should be able to be measured in more specific way.
- There’s not enough high quality startup near me (a problem for investors)
- There’s not enough early stage venture capital or angel near me (a problem for early stage startup)
- It’s hard for me to access to mentor network, so that hard for me to collect feedback and get coach by people who knows about challenge in startup venture building process
- It’s hard for me to connect with people with global experience and connection
- It’s hard for me to get people work for startup
- It’s hard for me to talk with corporate professionals to get feedback on my MVP, and hard for those people to figure out a way to work with my startup in their organization
- I’m interested in building a startup. How could I get to know more people and network with them? How could I learn from the good or bad experience?
So the list could go on and on, based on the real problems I encountered. Those problems could be quantified and compared with people who lives in Silicon Valley or anywhere else in the world.
Second things is about a minimal viable product that could potentially solve those, get customers input, and then pivot/revise, etc. Just to re-group the problem examples above and get some potential “features” as example:
- Lacking of talents
- Lacking of deal flow
- Lacking of network event
- Lacking of educational programs/contents
- Lacking of international event/connection
So if there is a service that could address those point paint, wouldn’t someone be willing to pay for those features, especially for those in the earlier startup ecosystem?
In another word, what’s the value of startup ecosystem building that people really want to pay, based on the features of product I develop and offer? And who are those “people”?
In my journey with TTA, I partners with a lot of different communities, accelerators, startups, or event VC firms doing things to address above if not beyond. In terms of business, types of organizations could be simply cut into two, and their PMFs might looks like below:
#1 Make money from somewhere else: organizations who see those effort as their own ecosystem enablement/marketing effort to build brand, generate awareness and to create more potential partners. So example like a16z and Y-Combinator are doing podcast or Startup School. AWS is doing its Startup Day. Google Cloud is doing a whole bunch on startup. Fund-back accelerators also make most of the return from investment gain. Corporate who spend money in corporate accelerator or innovation program should also be listed here. A lot of those initiatives or services comes in free. Government, in another hand, is “quasi-make-money-from-somewhere-else”.
PMF does not really matter here as they all have their own PMF in other places long ago. As long as those initiatives or programs could hit the marketing objectives, like # of attendee in target group, # of reach, conversion, # of high quality deal converted into portfolio…they are in good hands.
#2 Make money mainly from the service:
- Organizations who serve #1: as long as #1 exist this category would work. Sometimes organizations here will also be #1 so as to generate more demand from #1 corporate and lock in their business leadership. Challenge here would be the statement: #1 continue to exist. This could be like the thriving startup trade shows or events like Slush, Web Summit, etc. The events might get main revenue from sponsorship, which could be from organization in #1. If the main revenue is from #1 sponsorship, then they get the PMF now as long as #1 continue to invest into ecosystem enablment efforts. But there are a lot of competition out there now.
- This could also be the service providers to provide professional training or content. For organizations in this category, they will find that there are a few free services as competitors out there from #1. This is the tough category considering the free service and the resources from #1. For organizations or even individual here, looking for a PMF that has a more sustainable business model could be important.
So to sum up, #1 is where the business model of the “startup ecosystem building” works at this moment; and all the PMFs or even business models of #2 depend on that.
With that said, it actually not a bad thing. The investment from big names in the industry into the startup ecosystem building by default means that startups contribute to their revenue growth in a healthy way. If the investment mix in #1 between government and private could be heavily skewed to private, as in Silicon Valley, that’d be a nice indicator that the ecosystem builders already done the job, intentionally or unintentionally.
