A startup’s journey through the idea maze and into the future

There is this fascinating business notion in the venture world referred to by some VCs as the “idea maze”. I first came across it in a 2013 blog post by Chris Dixon of a16z, in which he presents the uncommon argument that ideas do in fact matter. What are good startup ideas? For Chris, they are “multi-year plans that contemplate many possible paths according to how the world changes.” Something that became clear to me as I got more exposed to early-stage startups is that the complexities of the market indeed transform a startup’s journey into multiple diverging paths with many potential dead-ends. My own understanding of the idea maze after reading Chris Dixon evolved. The challenge of growing a startup almost always looks more like a maze than like the straight journey the tech media makes it out to be with headlines such as “Startup X raises $10M to change the world”.

I learned that a new startup that is after VC funding has exactly 5–10 years to produce outsized economic return by embedding its vision of the future into the world. I also learned that the patterns of outsized success show that only a few startups emerge every year as winners every year. Out of the tens of thousands of those who launch their battle towards different founder-conceived visions, a few founders do get it right. Since the future is a single point where everything converges, companies that win the future are only those that survive the maze and emerge at that exit point.

It does do much justice to repeat that more than 90% fail or barely break even, as the industry cliché goes; what’s indeed specific to the venture world compared to the rest of the business world is that venture success follows a power-law distribution and leads to less than 1% of startups generating most of the shareholders’ returns. Founders have to make tough decisions at every bump and turn to rightly maneuver the changing system of economic forces acting against or in their favour. And that requires a good sense of strategy and foresight.

Combining Chris Dixon’s thoughts with interviews and writing from other promoters of this theory such as Marc Andreessen and Balaji Srinivasan, we can begin to understand that a good startup founder has carefully studied the maze when he/she:

• Thought of the deepest questions around the problem for a long time
• Has looked at the history of the industry, the players in the maze and the casualties of the past
• Understood the technologies that are likely to move walls and change assumptions
• Went through the logic maze of how to try the idea and what to do if it doesn’t work
• Thought about the implications if they learned something new
• Segmented the market well
• Anticipated which turns to lead to treasure and which lead to certain death

After having gone through this exercise a few times with different founders and having read thousands of pages on startup strategy by great thinkers, I have developed my own meta-framework for thinking strategically through the idea maze. And so the objective from this essay is first to talk about the methodology of studying the maze, especially in the very early stages of a startup’s life. Second, I would also like to invite founders to up their strategic game as an additional means for success — alongside the things they regularly do such as hiring talented people and building great products.

I will go through four actionable parts:

Part #1 - Gaze into the future to find personal conviction

Part #2 - Identify future consumer value-drivers

Part #3 - Find your positioning through customer obsession

Part #4 - Envision the path towards the $100M revenue threshold

1- Gaze into the future to find personal conviction

As business increasingly becomes customer-centric and society-shaping, startups have emerged to be like time vessels that we build to go into the future. A founder’s vision is to be built on market scenarios that he/she believe will happen — with maximum passion and conviction. A founder must attempt to answer the question “How will the future be better if your startup succeeds?”. Sometimes, he/she might be just guessing and it might be risky, but starting with a bet on a certain direction and working towards mitigating all the risks is what startup success looks like. Sean Ammirati, partner at Birchmere ventures, writes in a piece on seed stage investing that “Great Entrepreneurs create the world the way it ought to be” and encourages founders to ask “If your business succeeds, what does the world look like in 3–5 years?” The most important thing in any fundraising pitch is the narrative, as Twitch founder and previous Y Combinator Partner Justin Khan notes. The graphic below will demonstrate the narrative model to you in a very simple way:

Daniel Egger is a foresight and strategy thinker who insists that we have to be able to experiment with alternative future realities and embrace peoples’ inspirations to create narratives about them — all before we decide on our innovation capabilities. The concept of the “adjacent possible”, coined by Steven Johnson, tells us that the best ideas see the world as what it could be by exploring the parameters of possibility. In an essay by First Round capital called “Future Founders, Here’s How to Spot and Build in Nonobvious Markets” the adjacent possible is alluded to by Gil Dibner, a prominent European venture capital investor, who explains that the goal is to “Explore fringe elements to spot pockets of the future before everyone else”. In a short Youtube clip about the power of ideas, Jason Silva — philosopher and futurist — encourage us to compare an idea to a seed that is self-organizing and that instructs the soil arounds it to eventually turn itself into a tree. Ideas are similarly refined by people and society so that they are given new forms to pull the present forward through more complexity and more organization. The objective would be to bring in a new world that empowers humanity to soar above its limitations. Jason adds that “We’ve taken matter of lower organization, we put it through the filters of our brains and we extruded smartphones and social media and networks”.

According to Marc Andreessen of a16z, there’s no such thing as a new idea in itself. But if nothing is original, then what is innovation? It’s deriving something new by combining existing blocks. Looking at the past is certainly almost as important as looking to the future. In a way, Chris Dixon also gives advice in his post about studying the history of your idea to unlock the future, saying that “If your idea has been tried before (and almost all good ideas have), you should figure out what the previous attempts did right and wrong.” The idea maze hence also relies on the fact that it’s very likely that someone else has either already attempted to envision similar ideas before or is in the process of trying to make it happen.

This is why recognizing and matching patterns in the world become a necessity. Scott Jancy, writer and speaker on media and strategy, puts the concept of pattern-matching into wonderful writing: “Patterns exist on macro and micro scales and the daily routines of life are what sustain us as individuals and form the foundation of civil society. Annual occurrences such as the four seasons, anniversaries, birthdays, weather phenomena, and annual political, economic, or sporting events provide more depth and substance to what people view as existence. As waves, patterns dissipate over time and can be an opportunity for growth when synchronized with another pattern of the same frequency. Sifting through various media and by maintaining awareness of one’s surroundings, one can see patterns and trends emerging in various areas such as brands, aesthetics, words, graphics, architecture, politics, speech habits, and fashion. Working in the space between patterns is where one can discover the links between disparate elements and it’s where opportunities exist to create something new. It is at these intersections in particular where waves of ideas, technology, or belief systems merge that one can start to create a new reality.” I find this graphical quote to be a nice metaphor for the process:

The task of gathering up ideas and connecting the dots encompasses reading anything from industry reports and academic literature, to doing PEST analysis and trend extrapolation, analyzing changing customer value systems, digging through decisions made by companies in the sector, talking with industry experts, reading startup profiles/investor blogs, following publications like Techcrunch and Venturebeat, looking for failed company postmortems, reading founder and investor comments on recent fundraising deals, and listening to interviews and podcasts with other founders in the space you’re targeting. What you’re looking for, most importantly, is to collect and frame the scenarios of the future. After finalizing what their vision looks like, founders may also then turn their attention to identifying the business levers that enable building the vision. The research will at the same time point to new business logics that would work by drawing analogies and modeling your startup after others that share similar objectives, similar business models, similar targeting etc. Chris Dixon again points to this in his essay by mentioning the following examples: “If you are building a “peer economy” company it can be useful to look at what Airbnb did right. If you are building a marketplace you should understand eBay’s beginnings.” A basic template that I made on the pet care market can be found here, and can easily be expanded upon to understand business models and success/failure factors. Great investors usually excel at pattern-matching from looking at thousands of startup per year. Yet founders can greatly benefit from the method too in order to learn fast about their industry and confirm their vision on the future.

2- Identify future consumer value-drivers

Behind truly visionary ideas always lie paradigms of human progress and evolution. David Mattin, Global Head of Trends & Insights at Trendwatching, finds that innovation opportunities are created at this intersection of two things: change and basic human needs. David notes: “Here’s how new trends, change, and basic needs relate to one another: new trends emerge when some change in the world — a new technology, a new economic moment, a new attitude, whatever — unlocks some new way of serving a basic human need.” Indeed, changes today enable us to take a shot at predicting the future. Gil Dibner asserts that to find those new opportunities, “We should be monitoring what’s compounding at a fast rate, or alternatively, where adoption is growing reasonably rapidly.” Both Gil and David’s comments tell us about the need to understand shifts on both the supply side with technological progress and the demand side with growing needs. In effect, disruption rests not only on technology but really on the value added in customer applications and their different contexts. Humanity has always had the same struggles and the same motivations, and every time a new technology appears it is oriented towards them. Andrew Chen, who’s also joined a16z, creates a compelling case in his 2018 investment thesis on that “Even within all this innovation, we are the same people as 100,000s of years ago.” This is a testament that consumer opportunities are not saturated, and basic needs such as housing, healthcare, wellness and transportation are widely open for disruption. The opportunity of new tech to be applied to ancient human motivations has just begun to unfold. Even as you see everyone spending more than 2 hours a day on average on their phone, online spending still claims less than 5% of total consumer spending. But that’s not the whole story. Human needs also change over time. Technological innovation may even sometimes be the cause of changing behaviours and expectations — so are changing environments and emerging beliefs. There will always be newer and higher needs to take advantage off.

Daniel Egger’s inspiring book goes a long way in explaining how to balance technology with the human perspective to create new value. He says that “The present and the future are about sense-making, about what humans value. Yet even our basic characteristics — what defines us as humans — are always changing”. Getting more specific, he talks in the first chapter of the book about a grand business shift from providing functional product benefits since the 1900s to providing emotional benefits in the 1950s and finally providing meaning benefits in the 2000s. His ideas explain that quality, price, efficiency, connection and even status benefits are no longer the main value that customers demand. What is? Experiences that spawn “psychic fulfillment” and stimulate personal significance. The learning from this is simple and clear — Building the necessary functional benefit but also add impactful personal experiences and you’re already on your way to creating the future.

To further understand value generation, I was particularly impressed by Bain & Co‘s elements of value pyramid. Different types of needs are broken down further into 30 B2C elements and that can help a company create an edge with consumers. It looks a bit like Maslow’s hierarchy of needs, but has more of an value creation focus that can be harnessed for innovation. Functional elements such convenience and effortlessness come first. Then come emotional elements such wellness and Entertainment. After that are life-changing elements such as belonging and hope. At the top of the pyramid lies self-transcendence. Jamie Cleghorn — a partner with Bain’s Customer Strategy, Marketing and Technology practices — though argues that in our times companies should pay more attention to the higher-level elements: “Increasingly, companies have to look at social-impact and inspirational values because the market, the customers demand it. One of the thing that we see that value is transient. Buy decisions are made by individuals, and as millennials increase their buying power, we see them bringing their values to the table. What was cutting edge yesterday is not what it is today. So there’s a constant race.”

A few years ago, I became interested in a thesis on how technology companies can generate value by removing friction points from a customer’s job-to-be-done via digitization. That was a guiding process for me to recommend features and enhancement for the music streaming startup I worked with. I then figured out that there are technologists that are digging much further than me into friction reduction concept. One particularly interesting thinker/investor is Alex Danco, who’s part of the Social Capital VC discover team. In a series of posts called “Emergent Layers”, Alex notes that customers who are overserved by incumbents around a scarce element will flock towards a new entrant who offers a simpler/cheaper solution that also covers another level of the job-to-be-done. This higher-level motivation is one around which they are actually underserved. The removal of the scarce element via technology is itself the reason why customers can be now served better. Alex takes us through examples such as AirBnB (people overserved by expensive hotels switch to a simpler solution for “feeling like a local”, a higher level job for which they were underserved), Google (people overserved by online directories and portal switch to a simpler solution of finding the right answers, a higher level job for which they were underserved) and Uber (people overserved by mostly unused cars switch to a simpler solution that gets them a personal driver that picks them up and takes them effortlessly from A to B, a higher level job for which they were underserved).

According to Alex, a concurrent shift from i (abstraction of a scarce element) to i+1 (emerging scarce element) and from j (overserved customers) to j+1 (underserved customers) causes market transformation where business model innovation and power changes occur. until the whole cycle is repeated again. Whenever one scarce resource is turned abundant by a certain technology, there is another scarce resource that forms and constitutes a new value extraction opportunity. On one hand, a shift from scarcity to abundance causes higher demand for a new solution that again abstracts away the newly emerging scarce element, and so on. This begets a really important question that founders should ask themselves about the future value proposition of their startup: “What’s the next scarce resource that we can master and turn into value?”

Looking at the three theories of value together, we notice a common pattern. There are always basic needs that innovators can target, yet there is a future direction to value generation around targeting higher-level abstract values:

• Daniel foresees a persistent move towards products that are meaning-making on a psychological level
• Subjective elements at the top of the pyramid Bain & Co’s like hope, belonging and self-transcendence are becoming more important to target
• Alex’s hypothesis dictates that as scarcity decrease, there’s always the higher level aspects of a job-to-be-done

In effect, the implication of this convergence in ideas is a strategy of creating a state of abundance — as Alex Danco calls it — where not only scarcity and complexity are removed but also where products help people live better lives. Two years ago, I wrote a blog post on the matter and explained that technologists should aim to build frictionless experiences through the removal by design of both unnecessary clutter, uncertainty and cognitive effort so that higher experiential utility and well-being can be generated in the achievement of the consumer’s goal — stating that two great examples of this are evident in instant music streaming where anyone has the freedom to access any song in the world in less than a few seconds (Spotify) or in on-demand transportation where anyone has the privilege to get a car to their doorstep in a couple of minutes and go wherever they want (Uber). To borrow an idea from James Surwillo, a metamodernist business thinker who states that business value in the digital age is increasingly found not in physical assets but in unseen abstract things such as networks brand data and intellectual knowledge, I believe that so too does consumer value increasingly lie not in functional products but in unseen abstract values such as psychic fulfillment, individuality, connection and values.

We are undeniably not yet at the point of full abundance but we, I believe, in the very final stages of scarcity. It is apparent, by looking at the last few decades, that technology essentially makes the economics of scarcity obsolete. Creating abundance is a great and noble goal for any startup being born today, and is the main driver behind value generation. Nevertheless, I’ve actually found that it is better to replace “abundance” by “post-scarcity” because it leaves the imagination open to opportunities that can happen beyond the scarcity we are on the verge of reaching. The future, from now on, is about creating a utopian world where the human condition is subject to worriless, meaningful and free living. Post-scarcity is best explained by utopian revolutionary Murray Bookchin, who believes that it is not solely a material notion but a psychological one too. He really expands it into something much bigger, where personal values are indeed more preeminent. Post-scarcity, for Bookchin, is defined as “more than an abundance of the means of life: it decidedly includes the kind of life these means support. The human relationships and psyche of the individual in a post-scarcity society must fully reflect the freedom, security and self-expression that this abundance makes possible. Post-scarcity society, in short, is the fulfillment of the social and cultural potentialities latent in a technology of abundance.”

3- Find your positioning through customer obsession

After the two steps of building conviction around future states and understanding where value could be created in your specific market, the next step is to understand your strategy behind customer adoption. For me, adoption requires two things: positioning and market readiness.

Alex Danco follows up his writing about abundance and the consequences of it. This is that removing friction creates hyper-targeted “if” options, or default “else” options. Whereas friction creates tough choices on where we need to spend time and energy, abundance creates binary outcomes (it’s either exactly what the consumer wants or not). He further writes that “ Most of the interesting scarce resources are accumulating on the demand side: consumer preference, consumer intent, consumer loyalty, consumer impulse, consumer aggregation.” The result? Consumerization hence leads on one hand to point businesses that hyper-differentiate to solve specific customer jobs, and on another hand to massive utility businesses that power other businesses and charge them for using their function. In an abundance context, “The Queen speeds into a higher gear, and the tech supply side responds by adopting two increasingly contrasting strategies:

1. Go all-in on serving a customer differentiated instructions expressing exactly what they want, knowing that if you get it right, you have very little marginal cost of replication and can fully trust the underlying abstracted utilities to scale up with you. Be Slack, and trust in AWS.
2. Sell pickaxes to the gold miners, at massive scale. Be the abstracted utility that grows continuously, swallowing up ever-more underlying demand, knowing that you never have to pick winners. You’re the house. Be AWS, and trust in Slack.”

B2B businesses personally don’t excite me as much as consumer-facing ones and I personally think that building utility businesses is hard today because you’d be competing with the large platforms of the world (Facebook, Amazon, Microsoft), so I’ll focus on the differentiated consumerization aspect of this for now — without forgetting the important caveat that many consumer businesses do eventually evolve into utility businesses and ecosystem shapers as they garner more user engagement (like Facebook did, and many others)

In the beginning of a thought-provoking talk on go to market fundamentals, Jennifer Jhonson announces one of the most important rules of new tech ventures: “Position yourself or be positioned”. Positioning, in my own definition, is both the differentiated and marginal value created by a startup that will lead to customers adopting their product and not that of someone else’s. Jan Milz, product thinker, has an interesting way of describing positioning from the consumer’s perspective: “Users have problems and needs in the first place …And they try to solve it using your solutions. When applying the jobs to be done framework we learn it’s the user offering a job in the market and companies are allowed to apply for that job. If you are successful users hire your product to make progress. If you do it wrong your competitor will get the job”. Famous disruption theorist Clayton M. Christensen explains that when innovation is driving product positioning, the value created can be sustaining or disruptive. Sustaining innovation revolves around making an existing product attribute (that customers base purchasing decisions on) multiple times better — usually 10x — and disruptive innovation revolves around creating new customer value that was never experienced before. Asking “why does my product have an edge over competitors” and “how big is that edge?” is how you will find your positioning.

Founders will sometimes choose to enter a market already crowded and try to execute better than everyone else. Coming into this environment often requires a unique insight about customers — what many VCs call a contrarian approach — that sets apart the startup’s specific approach to the market. Other times, we see great companies that are anticipating customer needs and/or owning intact problem spaces. They imagine new frontiers of possibilities or essentially surprise the world with solutions to that consumers may not even realize were possible. This is exemplified with Ford’s success with cars that replace horses or Apple’s success with smartphones. Steve Jobs famously said that “Your mission is to figure out what they’re going to want before they do”. In this context, marketing initiatives have to start by educating the market that there is a problem. Potential customers may not even consider that they have a problem to solve. Jennifer touches on this topic in her talk adding that “Sometimes, you actually have to show people a problem that they didn’t even think they had. So you not only have to educate them on what the problem is, you actually have to educate them on why it’s a problem to begin with”. This is not to say that this latter strategy is always better, but in a time of distribution channel saturation and aggressive fighting for customer mindshare, the truly transformational and remarkable ideas have more chances to succeed — that is if they are executed well enough.

This tension between improving against the competition and launching something completely new should be resolved when thinking through the maze. Yet regardless of your product strategy, be it contrarian or first, sustaining or disruptive, success in the market requires founders to also get timing right. As Victor Hugo would say, “Nothing is more powerful than an idea whose time has come”. In fact, research on failed startups has shown that timing is most often what makes or breaks a startup. So the question a founder should be able to answer to any investor is “Why is now the right time for your startup to take off?” To be able to grow fast requires that the market forces be right at your tailwind and the market conditions be welcoming. On the issue of timing, Gil Debner again advises us that first movers are often wrong. “Whether it’s the need to wait for more infrastructure or for consumer habits to change, sometimes you’re just truly too early. For early e-commerce, people needed to get comfortable shopping online. For pen computing, the hardware just wasn’t there to create a great smartphone experience. You may have a great idea, but you have to be objective and see if the conditions are there to support it.” Yet there are definitely ways to push the readiness of the market in your favor — for example by increasing the trialability and reducing the complexity of the product — and there are even ways to measure and predict adoption in a systematic way using the Bass Diffusion formula (which is by itself a topic for another post and I will stop here after pointing you to it).

4- Envision the path towards the $100M revenue threshold

The venture opportunity is about changing the world no doubt, but it’s also the vehicle to make founders, employees as well as shareholders and their LPs, rich. The combination of “software and media”, as Naval Ravikant founder of Angelist puts it, essentially creates business leverage because of near-zero marginal cost of replication and near-zero marginal cost of distribution. Technology thus does not only enable rapid consumer value creation, but also wealth creation for its owners. This last part is about capturing the value you will create after thinking through the above three steps.

Harvard Business Professor Stefan Michel is someone who believes that understanding value capture innovation is as important as focusing on value creation. He explains that many companies often under-invest in optimizing value capture. He writes: “ Sometimes a business can get away with failing to think about value capture if it sells plenty of its new offerings through existing approaches. But when value capture goes unexamined, money is usually left on the table — and sometimes the only thing that can save a business is finding a way to capture value. Yet even avid innovators often have a blind spot when it comes to value capture. They may assume that if value is created, rewards will follow. Indeed, one reason value-capture innovation tends to be overlooked is that companies that do it well often simultaneously innovate in value creation, and the latter tends to take center stage”. Value is captured in the forms or revenues which are the ultimately dictate valuation. The most important milestones for startups going through seed and series A funding are those that prove the market exists and the ability to capture the upside opportunity. Hence revenue architecture becomes an essential task, and this is done by optimizing product value to reach pricing targets that one or many consumer segments will repeatedly pay.

A big market is like a VC’s first commandment. “Thou shalt address a large market”, I imagine they would write if they had their own VC bible. VCs the like to see that the market potential of your company enables high-growth, and most aim towards the $100M revenue threshold or a number above from which returns they can return their fund with. A large demand opportunity dictates further fundraising rounds at higher valuations, exits and in some cases IPOs. For Leo Polovets, Partner at Susa Ventures, a startup’s value is proportional to the ratio of Market size/Competition factor. His advice is that the best position to be in is in a large market with minimum competition. And so the first major question to ask is: “Are there enough customers in the market to generate at least $100M of revenues in the next 5–7 years?”. As a quick mental framework, it’s good to think about it in this way:

Most investors are interested in proven markets such as the insurance industry or the beauty industry. The challenge here is to prove that the company can disrupt the incumbents’ offerings and steal competitor market share through new technological solutions they simply can’t copy quickly enough. Here, a top-down analysis makes sense for understanding the size of the market and its growth potential — while keeping in mind that market research firms are usually the worst predictors of market growth. To determine market share expectations, founders need to make sense of the rivalry patterns and theorize over the possible reaction that traditional players, which will depend on their resources and on their readiness to innovate. For some startups, a usually smart tactic would be to go niche at first into a space that incumbents would disregard, build a base there and gradually take up adjacent segments/markets/verticals/categories that enable the $100M revenue potential. As Venture investor Mike Maples says “When you’re starting out, it’s better if your potential competitors don’t care about what you’re doing.” Niching does not only help in repealing competition, but also in making sure company resources are better focused and even in taking advantage of closely knitted groups who talk more among each other. Once the startup has a foothold in one segment/niche category, it becomes easier to expand from there.

The other way to go about proving a large market is visualizing an expansion of existing markets, or even the creation new ones — and this is directly linked to the kind of innovation we talked about in previous parts, which touches intact problems and newly emerging needs/beliefs. This strategy believed to bring higher returns when it succeeds, as competition in the space would be inexistent. The context here is about going after markets that don’t yet exist or may appear too small in size to prove the $100M opportunity exists. In reviewing Clayton Christensen book on “competing against luck”, Amit Ranadive — product manager at Instagram — explains the case of Airbnb when it comes to creating new demand: “Airbnb found that 40% of its guests say they would not have not made the trip at all if Airbnb did not exist. And Airbnb’s hosts would never have considered renting out a room or their whole home if the company did not exist. Thus, for these guests and hosts, Airbnb was competing with nothing”. A great way to demonstrate a large market opportunity early-on is through a bottoms-up analysis on the size of the problem — usually starting with the number of people who are potential users, multiplied by their willingness to pay. A better way is to combine this with finding proof that the opportunity exists through experimentation. Since founders here are making the assumption that a not-yet-evident macro trend will prevail, their job becomes to understand how to ride the trend, but it also becomes about promoting the trend themselves. When there is no existing demand with a clear problem, adoption tactics that are typically used to capture existing demand are irrelevant. To create demand is definitely more challenging, more capital intensive, and involves spending more sales & marketing capital. In the journey to expand/create a market, a founder must ask if he/she can shift customer spending habits by shifting customer assumptions and behaviours.

When founders set out for the startup journey, it is often preached to them that the goal is to find Product-Market Fit (PMF), a situation in which your proposed solution fits customers’ needs and there is validation that they’re willing to use your product. This is usually the milestone needed from the Seed Round stage going into Series A. The claim is that it proves the business has viable and repeatable business model. However, I find that this concept is often oversimplified. PMF cannot be seen alone without looking into the nuances of marketing and customer segmentation. It’s true that a startup might have found some segment out there that wants its product and that the team might have learned how to reach them, but that doesn’t mean it’s linear scaling from now on towards becoming the $100M goal. There can be many segments in a market (demographic-based, needs-based, psychographic-based etc.) and their needs can be dynamically changing, especially in today’s advanced technology markets. Furthermore, facing the inertia and loss aversion of society will not be easy, crossing the chasm from early-adopters to the majority will be a challenge, marketing spend will have diminishing returns over time, and rapidly moving across borders and cultures to find growth will be the most complex task your team will face. This is actually what makes consumer startups hard, and why so many pivots happen even after Series A.

Early-stage market assessment tests such as in-depth customer interviews, ethnographic studies, and LTV forecasts inform your strategy and validate higher level assumptions. MVP experiments alone are not enough to test the hypotheses of your grand vision on the future and of the risks that threaten your journey from present reality to achieving that vision. Moreover, I personally believe — unlike many others in the industry — in that carefully thought-out strategic roadmaps and early 3–5 years financial projections give startups an edge, not because of their accuracy in KPIs, but in understanding what is needed to scale the business to $100M+ in revenues and laying out the assumptions needed to operate in high-growth mode. But that’s not to say that everything you forecast and measure will be set in stone. On the contrary, the idea maze should help founders discover different turns and paths they can take towards their goals. Daniel Egger, whom I mentioned now twice before, also touches on this point: “Strategic foresight isn’t about certainty, but increasing the level of preparedness”. Similarly, Guy Thurner (early stage VC at Hyde Park Venture Partners) believes that founders should do more forecasting, which for him is about assigning probabilities and risks to different outcomes and then going out to find the evidence needed to support the analysis.

This actually brings us back to where I started the post with Chris Dixon’s thesis on good startup ideas. The last point to be made here on how to go about honing in on the right path. At first, having strategic options would actually give you an additional advantage in advancing your vision without being on the hook to make any move before it’s validated. And this what the concept optionality, which Nassim Taleb brings forward in his book Antifragile, proclaims. I found that Thomas Oppong, founder of AllTopStartups, defines optionality best: “The primary essence of optionality is the ability to exercise the most favourable option that will advance your goals without predictable knowledge that would allow you to make an informed decision...Preserving optionality means waiting as long as possible to make a decision”. In other words, have different scenarios and alternatives until one’s right and the odds are in your favor — your biggest advantage as a lean startup is the ability to experiment with no regards to failure, pivot into a new strategy when one idea doesn’t work, and constantly generate new growth potential. Yet at the same time, Thomas warns about optionality as an excuse to commit to a decision and play it out till the end, saying that “Taking steps, learning, relearning, and taking more steps is the only way to grow and make progress”. Founders need to keep that balance between optionality and conviction in order to progress forward. It’s important to find passion in a specific vision, yet equally important is to be prepared to revise assumptions and keep learning as you progress through a maze that is constantly throwing obstacles. Rate of learning is widely believed to be the precursor to success in venture. So keep digging for insights, knowledge and patterns in the market. It’s only when you combine the management of good ideas with the right execution plan that you get a competitive edge.

Jad El Jamous