How to Build a Successful Startup: Essential Advice from Y Combinator and Unicorn Founders 🚀
Building a startup is both an exhilarating and daunting endeavor. It is an ongoing process of learning, adapting, and overcoming challenges. However, building a successful startup is even more challenging — it requires the right approach, the right mindset, the right guidance, and ultimately the elusive product-market fit (PMF). In this article I’ll cover the most essential advice for early-stage startups.
Why should you listen to my startup advice? Well, first of all, it’s not my startup advice, but a collection of the best advice I’ve learned from extremely talented people who are a lot smarter and more successful than I am. As a serial entrepreneur I’ve been lucky enough to launch several multimillion dollar businesses, one of which grew to hundreds of millions in revenue per year, another made millions in the first year alone and grew to tens of millions in revenue after two years, and another was acquired in less than one year. I was also part of the founding team of the most popular legal website on the internet and created one of the most played online games in the world while still in high school, garnering over 40 million visitors per month and players from over 150 countries. I’ve also failed more times than I can count and that’s why you should read on to learn from my mistakes.
Throughout my entrepreneurial journey, I’ve had the privilege and good fortune of benefiting from an immense wealth of wisdom from many exceptional individuals. When going through Y Combinator’s Summer 2021 batch with my startup Blixo I had Michael Seibel (CEO of Justin.tv, which became Twitch and sold to Amazon for almost $1 billion), Tim Brady (Chief Product Officer and first employee at Yahoo!), Diana Hu (cofounder of Escher Reality, which is the technology that powers Pokémon GO), and Calvin French-Owen (cofounder of the unicorn data platform Segment) as group partners. Their advice and guidance coupled with the lessons learned from the founders of YC — Jessica Livingston (author of Founders at Work: Stories of Startups’ Early Days and organizer of Y Combinator’s Startup School) and Paul Graham (PG’s essays) — have been instrumental in shaping my understanding of startup success. Outside of YC, I’ve had the benefit of advisors and mentors like Sizhao “Zao” Yang (co-creator of Farmville, which had close to 100 million monthly active players at its peak and made over $1 billion for its acquirer, Zynga), Kevin Gaither (SVP of Sales at job search unicorn ZipRecruiter), and Tim Stanley (CEO of Justia, the most popular legal site on the internet) who have helped me tremendously in my growth as an entrepreneur and business leader.
One of the biggest realizations I’ve had on this journey is the critical role of PMF in startup success. In the past, I believed some of my startups failed due to a lack of funding. I was so sure of this hypothesis that I even advised budding entrepreneurs in a video series I did for Forbes to “raise as much as you can, when you can.” It was only later, after my experience with YC, that I recognized the flaw in this advice.
Now I caution against raising too much money, likening it to overeating at a buffet. If you gorge yourself on funding, you become lethargic and complacent. But if you’re hungry and lean, you are more driven to succeed. Instead, focus on finding a few customers who love your product before investing heavily in growth activities such as paid marketing. Overfunding can lead to a loss of focus and a sense of complacency, which can interfere with your pursuit of the only thing that really matters: PMF.
After all, PMF is the catalyst for a successful startup. In the absence of a product that genuinely solves a “hair on fire” problem for a significant market, no amount of funding will guarantee success. I delve deeper into the concept of PMF later on, but for now, it’s crucial to understand that striving for PMF should be a startup’s primary focus.
Remember, none of this information is a secret. It is all publicly available in resources like YC’s Startup School and PG’s essays. But knowledge is only powerful when applied. You can read an encyclopedic entry about an apple, but you won’t truly understand what an apple is until you take a bite out of one. So, let’s take these lessons and use them to shape the trajectory of our startup journeys towards success. After all, success in business isn’t just about surviving; it’s about growing large enough to make a meaningful and positive impact upon the world.
Early Stage Startup Advice TL;DR
1. Start with a great product:
– Build something people want.
– Solve a “Hair on Fire” problem for your customers.
– Find 10–100 customers who love your product.
– Growth is the result of a great product, not the precursor.
– Don’t scale your team/product until you have built something people want.
– Most companies don’t die because they run out of money, they die because they never find PMF.
2. Launch and iterate:
– Launch now! Don’t wait for perfection.
– Do things that don’t scale.
– Find the 90 / 10 solution.
– Write code — talk to users (fast feedback loop).
3. Focus on what matters:
– Startups can only solve one problem well at any given time.
– Ignore your competitors, you will more likely die of suicide than murder.
– Valuation is not equal to success or even the probability of success.
4. Take care of yourself and others:
– Be nice! Or at least don’t be a jerk.
– Get sleep and exercise — take care of yourself.
Check out YC’s Essential Startup Advice for more insights.
Mean People Fail
In Paul Graham’s essay, “Mean People Fail,” he mentions that a common misconception is that being mean can somehow propel you to success. This might seem true in some spaces, but it’s rarely the case among successful people. In the startup world, there is a pattern of good people succeeding and mean people failing. Here’s why:
Meanness makes you unwise and inhibits peak performance. Startups thrive on transcending problems, not attacking them. Being mean puts you at a disadvantage as it prevents you from attracting the best employees and promoting the spirit of benevolence that powers innovation.
Historically, success often meant controlling scarce resources, where meanness could give you an edge. But as we evolve, success increasingly stems from generating new ideas and creating new things, rendering meanness a disadvantage.
Meanness Will be Your Undoing
There are many instances where mean behavior has led to significant downfalls in both business and personal life. Here are a few professional examples. I chose not to use the names of the actual people or companies so as not to be mean myself by publicly shaming them:
1. Executive #1: Known for his aggressive and abrasive leadership style, he was involved in multiple scandals, including a highly publicized sexual harassment allegation, which ultimately led to his resignation. His company had a horrible retention rate, many people burned out before they reached their one year vesting cliff, choosing to leave money on the table rather than put up with his toxic attitude any longer. These scandals tarnished his company’s reputation, led many to boycott his company, and severely affected its stock price.
2. Executive #2: Fell from grace following a series of investigations into his company. While not characterized as “mean” in the traditional sense, his deception and manipulation — lying about his technology’s capabilities, misleading investors and regulators, and creating a toxic work environment — brought about the downfall of his company and criminal charges against him.
3. Executive #3: This CEO’s mean and abusive behavior towards women led to his downfall and the ultimate bankruptcy of the company he started. He used his position of power and authority to threaten and manipulate these women until many of them spoke up leading to his eventual incarceration.
4. Executive #4: Once a revered figure in the business world, fell from grace due to his mean-spirited and manipulative actions. He not only engaged in ruthless cost-cutting and downsizing, but committed fraud and then vehemently denied allegations, sued those who claimed otherwise, and tried to ruin the careers of those who dared to speak up. His actions ultimately led to his downfall, with him being stripped of his position and banned from serving as an officer or director of any public company.
5. Executive #5: Had a reputation for being difficult to work with, often firing people who wouldn’t agree to impossible deadlines or deriding people as “cry babies” when they would complain about his disrespect and carelessness. His behavior ended up burning out his team, which caused significant delays and quality issues. After subsequent products failed to live up to his first successful product launch, he was replaced as CEO and then eventually fired from the company that he started.
These examples illustrate that while mean behavior might bring short-term gain, it often leads to long-term failure. While an understanding and empathetic leadership style tends to nurture loyalty, trust, and sustained success.
People Won’t Want to Help You if You’re Mean
There are a few scientific studies that suggest people are less likely to offer help or cooperate with individuals who exhibit mean or unkind behavior:
1. Reciprocity and Social Cooperation Study (Nowak, 2006): In a study published in the journal “Science,” Martin Nowak, a professor of biology and mathematics at Harvard University, showed that individuals are more likely to cooperate with those who have a history of being cooperative themselves. In contrast, they tend to refrain from helping individuals who have shown unkind or uncooperative behavior in the past.
2. The Rejection of Unfair Offers (Sanfey et al., 2003): In this study, participants played a game in which they could either accept or reject monetary offers. The findings showed participants were more likely to reject offers they perceived as unfair, even when this meant they received no money at all. This suggests that people prioritize fairness and are unwilling to cooperate with individuals who behave selfishly.
3. Empathy and Altruistic Behavior Study (Batson, 1991): Researcher C. Daniel Batson is known for his work on empathy-altruism theory, which suggests that individuals are more likely to help those they empathize with. When someone behaves meanly or unkindly, it reduces our ability to empathize with them and, in turn, our willingness to help.
4. Negative Reciprocity in Ultimatum Bargaining (Fehr and Gächter, 2000): This study shows that individuals are willing to incur costs to punish others who behave unfairly or unkindly. This punishment serves as a deterrent to mean behavior and signals a reduced willingness to cooperate with such individuals in the future.
While these studies might not be directly about meanness, they offer insights into how unkind or unfair behavior can lead to social exclusion and a lack of cooperation from others.
Keys to Startup Survival
In Jessica’s keynote from YC’s third annual Female Founders Conference, which brought together more than 800 women building women-led startups, she mentions that “Nothing else you do will matter if you’re not making something people want. You can be the best spokesperson, the best fundraiser, the best programmer, but if you aren’t building a product that satisfies a real need, you’ll never succeed.”
Here are some suggestions from her keynote to help you avoid failure:
• Make something people want: To do this, solve a problem you have, understand your users, and be open to adjusting your idea.
• Focus: Keep your eyes on the goal. Avoid distractions such as unnecessary networking, worrying about competitors, and premature PR.
• Measure Growth: Choose a key metric and use growth as an indicator of whether you’re on the right track. Prioritize tasks that have the most significant impact on your primary metric. Set and meet weekly goals.
• Stay Alive: Keep expenses low and ensure revenue continues to grow. Remember, you can’t win if you don’t survive. Don’t run out of money — you typically need at least 6 months of runway left in the bank to raise a round.
• Fundraising Challenges: Remember, later rounds are much harder to close, so plan accordingly.
The Path to Success
In Sam Altman’s (CEO of OpenAI/ChatGPT) talk on How to Succeed with a Startup he suggests making “a product so good people tell their friends.” The key takeaways from this talk are:
• Make Something People Want: This is the motto of YC and for good reason: it will ensure loyalty and sustained growth.
• Have a Vision: Assemble a team of talented and motivated individuals and work towards a clear, ambitious vision.
• Be Quick and Adaptive: Act quickly and decisively, even when faced with limited data.
• Maintain Momentum: Establish a cadence, maintain momentum, and leverage your competitive advantage over time.
• Stay Nimble: Adapt to changing markets quickly.
Great Founders are Relentlessly Resourceful
According to Paul Graham’s essay, “Relentlessly Resourceful,” being relentlessly resourceful — adapting plans on the fly, demonstrating determination and flexibility — is the key to being a good startup founder. This is a handy litmus test for startup founders, co-founders, and early-stage team members. A good founder is not unlucky or hapless, a good founder moves heaven and earth to make their dreams a reality. They don’t let the world dictate their fate; they control their own destiny. That’s what it means to be relentlessly resourceful.
Here are some examples of successful founders who embody this trait:
1. Zhou Qunfei (Lens Technology): Born in a poor rural village in China, Zhou Qunfei’s early life was filled with hardship. Orphaned as a teenager, she moved to the industrial city of Shenzhen and took a low-paying job at a factory. But Zhou had bigger dreams for herself. She saved up her earnings to fund a part-time education, eventually starting her own watch lens manufacturing business in 1993. When mobile phones started gaining popularity, Zhou saw an opportunity and pivoted her business to producing glass screens for phones. Despite numerous challenges, Zhou’s resourcefulness and determination paid off. Lens Technology, now a leading supplier for tech giants like Apple and Samsung, propelled her to become the richest self-made woman in the world, according to Forbes. Zhou’s remarkable journey from a factory worker to billionaire, epitomizes the spirit of relentless resourcefulness.
2. Stacy Brown (Chicken Salad Chick): Stacy Brown founded Chicken Salad Chick out of her own kitchen when she was a single mother of three, looking for a way to make ends meet. When she learned it was against the law to sell her homemade chicken salad, she didn’t let that stop her. Instead, she found a business partner and opened a small takeout restaurant, which has since expanded to over 225 locations across the U.S. Her determination and resourcefulness in the face of adversity were key to her success.
3. Sara Blakely (Spanx): Sara Blakely, the founder of Spanx, invested her entire life savings of $5,000 into developing the product, which she designed to combat visible panty lines under white trousers. With no knowledge about the fashion or retail industries, she had to teach herself about hosiery design and even patented the design herself to save money on attorney fees. Additionally, when manufacturers were hesitant to take her on as a client, she went in person to North Carolina to convince them. Her relentless resourcefulness allowed her to build a billion-dollar company from scratch.
4. Oprah Winfrey: Oprah’s journey to becoming a media mogul was far from easy. She started her career as a news anchor, facing discrimination and harassment. However, her relentless determination led her to create “The Oprah Winfrey Show.” When she gained enough influence, she took the resourceful step of taking ownership of the show, which led to the creation of Harpo Productions. Oprah’s resourcefulness didn’t stop there. She launched a magazine, a radio channel, and even her own television network, OWN. Despite numerous challenges, Oprah’s drive, determination, and resourcefulness have been instrumental in her journey to becoming a billionaire and an influential figure globally.
These founders showcase how being relentlessly resourceful can be key to navigating the challenges and uncertainties that come with building a startup.
Make Something People Want
Make something people want. As YC’s motto, this gets repeatedly drilled into you if you go through their program. A cornerstone of successful startups is creating a product or service that people want. The best proof of this is when you and your team genuinely need what you’re creating. While ideas don’t need to be perfect, they should be thoughtful, honest, and built with a deep understanding of potential risks.
The Pitfalls of Ignoring Your Customers
Here are a few pitfalls you risk encountering when you lose sight of this crucial advice:
1. Wasted Resources: Time, money, and effort are finite resources in startups. Developing a product or service that doesn’t resonate with your customers is a waste of valuable resources. Each minute spent building an unneeded product is a minute taken away from potentially more promising initiatives.
2. Diminished Market Presence: Launching a product that people don’t want or need will probably lead to a lukewarm market reception at best. This results in reduced visibility, limited traction, and potential damage to your brand reputation, which can be tough to recover from.
3. Lack of Sustainability: A product that doesn’t solve a problem or fulfill a need lacks a sustainable market. Even if you manage to generate initial interest through marketing hype or novelty, maintaining long-term user engagement will be an uphill battle.
4. Missed Opportunities: The time and energy you devote to creating and promoting an unwanted product could be better spent identifying market gaps, understanding customer needs, and developing solutions that people genuinely desire. By not making something people want, you miss out on these opportunities.
5. Financial Risks: From an economic standpoint, a product or service that fails to attract customers will inevitably lead to financial losses. Revenues will remain stagnant, investors will be dissatisfied, and the financial health of your business will be jeopardized.
6. Demotivated Team: Working on a product that doesn’t resonate with users can be disheartening for your team. It may lead to decreased motivation, lower productivity, and a high turnover rate, all of which can negatively impact your startup’s momentum and progress.
Successful entrepreneurship is deeply rooted in empathy and understanding of your target audience. It’s not enough to build something that’s technologically advanced or aesthetically pleasing — it must also serve a tangible purpose and bring value to people’s lives. By focusing on creating something that people truly want, you increase your chances of building a successful and sustainable business.
Remember, billionaires are made not by exploiting people, but by starting companies out of a genuine interest in solving a problem. Hire people who are authentic and deeply care about the customers and want to solve their problems.
If you’re interested in learning more about making something people want, read PG’s essays, “Be Good” and “Billionaires Build.”
Find 10 Customers Who Love You
Focus on making something that a small group of people love rather than a product that a large group likes a little. This is your proof of concept. If there’s a small group of people who need your product so much that they’ll use it even in its initial stages, you’re on the right path.
In Seibel’s video on how to get your first ten customers, he explains that these are not just regular customers; they are users who are so enamored by your solution that they use it daily, purchase multiple times, become voluntary brand advocates, and stick with you through thick and thin.
It sounds like a tall order, but how do you get there? Here’s the roadmap according to Seibel:
1. Define Your Problem: You should have a crystal-clear understanding of the problem you want to solve. It is the North Star guiding your journey; the more specific you are about this, the better your solution will be at what it’s supposed to do.
2. Aim for Love: Your main goal should not just be to acquire customers, but to earn their love. Yes, it’s a strong word, but that’s exactly the reaction you should aim for.
3. Start Small and Simple: Look for customers who are more receptive to new startup solutions and are willing to tolerate an “ugly” prototype or minimum usable product. They’re more likely to engage in a dialogue with you, providing critical early feedback.
4. Start Charging Early: This might feel uncomfortable, but it’s essential. When customers pay, their behavior and expectations shift. To truly understand your customers and their needs, start charging as soon as possible. People won’t be honest until they’re paying you.
5. Embrace Rejection: Brace yourself for a lot of no’s. It’s part of the process. As Seibel says, it’s perfectly okay if 80–95% of potential customers reject you. What matters are the ones who say “yes” enthusiastically and are eager to sign up and pay.
6. Diversify Your Outreach: Don’t limit yourself to just emails. Depending on your target customers, consider outreach via LinkedIn, cold calling, or even door-to-door sales. Adapt your approach to best reach your target audience.
Remember, this journey is not about instant gratification. It’s a methodical process to find those who truly resonate with your solution and will be your advocates early on. And once you’ve found them, cherish and learn from them, as they’ll be pivotal in shaping the future of your startup.
Ugly Ducks to Unicorns: Solve a “Hair on Fire” Problem
One of the greatest misconceptions about startups is that your initial product must be polished and visually appealing. However, the truth, as exemplified by companies like Facebook, Brex, and Airbnb, couldn’t be more different. Before we dive in let me preface these examples by saying you never cut corners when dealing with life and death situations. The same goes for heavily regulated financial markets. Also, while not all successful companies solved a serious pain point for their customers, it can really help with sales and marketing if your super cool awesome product or service is also useful.
When Facebook launched its first version, it was far from the glossy, feature-loaded platform we know today. The design was basic, and functionality was limited. Yet, it offered a solution to a problem: the need for a social connection platform among college students. This initial group of users was so compelled by the utility Facebook offered that they used it, despite its shortcomings.
Similarly, Brex, the corporate card provider for startups, debuted with a rudimentary product. Yet, it directly addressed a pressing issue for many early-stage companies: the challenge of obtaining corporate credit cards without a credit history. The criticality of this “hair on fire” problem made users overlook the initial product’s deficiencies and embrace it wholeheartedly.
Let’s also consider the case of Airbnb. When it first launched, the website was quite basic, and the concept — staying in a stranger’s home — seemed outlandish to many. However, it presented a solution to a glaring problem: the high cost and limited availability of accommodations, especially during popular events. This real-world issue compelled the first users to overlook the platform’s imperfections and gave Airbnb its initial traction.
Each of these companies started with less than perfect offerings. However, they excelled in addressing an immediate, acute problem, making their solutions indispensable to a select group of users. These “hair on fire” problems are what truly matter to customers and solving them can give your startup the early adoption and growth it needs, even if your initial product is less than perfect. So, don’t be afraid of launching an “ugly” product. If it solves the right problem, your users won’t just tolerate it; they’ll love it.
Do Things that Don’t Scale
If you’ve been following the startup scene, you’ve probably encountered the mantra: “Do things that don’t scale.” While this concept, presented by PG in his essay by the same name and echoed in Livingston’s book “Founders at Work,” might seem counterintuitive at first, it is crucial for your startup’s success.
Here’s a simple truth: Startups rarely take off without significant effort. What may seem like an overnight success to outside observers often conceals the momentous early struggles that the original team had to undertake to ignite the spark. To kindle this initial growth, you’ll often need to do things that don’t scale. This might seem like you’re simply applying lipstick on a pig, but it’s a critical stage that can set the course for your startup’s journey.
Unscalable tasks, while they may not fit into your long-term growth strategy, provide two vital benefits. First, they can kick-start your growth, serving as the booster rocket propelling you into the orbit of sustainable, scalable success. Second, they grant you a deep, intimate understanding of your users, a perspective that is invaluable as you shape and refine your product. Take, for example, Viaweb, which offered to build stores for its users, and CD Baby, which included handwritten notes with their early shipments. The founder of CD Baby, Derek Sivers, wrote a silly email that was sent out with every order, which became so loved that it created thousands of new customers. These unscalable tactics not only fostered initial growth but also created unique user experiences that drove customer loyalty.
So, what are some of the unscalable things you can do to jumpstart your startup?
• Recruit users manually: Yes, it’s labor intensive and not sustainable long-term, but it provides crucial early user feedback that will help you improve your product.
• Delight users in extraordinary ways: Go above and beyond to make your early adopters feel special. Their enthusiasm can ripple out and attract more users.
• Focus on a narrowly defined market: It’s easier to satisfy a small, specific user base deeply than to mildly please a large, diverse one.
• Make users feel like signing up was a brilliant decision: Provide them with exceptional value right from the start.
• Launch as soon as your product offers utility: Don’t wait for your product to be perfect. Initial users can provide valuable feedback to refine it.
• Prioritize quality: Your commitment to excellence, even if it seems obsessive, can set you apart in the market.
• Identify and target enthusiastic users: Learn from your most passionate users and seek others like them.
• Create solutions for other startups: B2B startups can often find success in developing custom solutions for individual companies, which can later be scaled.
Real-World Examples of Doing Things that Don’t Scale
1. Stripe: The founders of Stripe, Patrick and John Collison, began by personally onboarding their initial users. They didn’t rely on automated sign-up processes initially. Instead, they even went as far as writing the code required to integrate Stripe into their customers’ platforms. This hands-on approach helped them understand their users’ needs and refine their product accordingly.
2. Airbnb: In the early days, the founders of Airbnb didn’t just wait for hosts to sign up and list their homes. They went door-to-door in cities, meeting hosts in person, taking professional photographs of their properties and assisting them in creating compelling listings. This direct approach was not scalable, but it significantly improved the quality of their listings and made the platform more appealing to guests.
3. Zappos: When Zappos started, they didn’t have a fully stocked warehouse of shoes to sell online. Instead, founder Nick Swinmurn went to local shoe stores, took photos of the products, and posted them online. When someone made a purchase, he would go back to the store, buy the shoe, and ship it to the customer. This approach was certainly not scalable, but it allowed Zappos to validate their business concept without a massive initial investment.
Remember, doing things that don’t scale is about understanding the customer and making something they really want. This approach provides invaluable feedback, and even though it’s time-consuming and not feasible in the long run, it can be essential for early-stage startups to validate their idea, product, or service.
Doing things that don’t scale early on won’t just ignite your growth — it can also shape your understanding of your users and refine your product, setting the foundation for your long-term success. It might seem like you’re stuck in the trenches, but remember, everyone has to start somewhere and every successful company today has been there before.
Startup Priorities
When building a startup, it’s crucial to understand where to channel your energy. Prioritizing tasks can be challenging, but applying strategic metrics can guide your decisions, keeping you on track.
Start by choosing a single metric to track your progress — this is almost always revenue.
Having a focal point for your efforts not only offers clarity but also provides a quantifiable measure of your growth. Retention is a good secondary metric as the combination of growth and retention is how you build a lasting business.
Prioritize features that will reach a broad user base, have a profound impact, and are cost-effective to build. Payback periods matter; aim for quick returns on your time.
In your startup’s early days, emphasize depth over breadth. Achieving PMF should be your initial aim. That’s not to say breadth isn’t important — it is — but ensuring that your product deeply resonates with your target market is a pivotal step towards your long-term success.
The 90/10 Solution
So how do you execute on these priorities? This is where Paul Buchheit’s (PB) advice, a YC Partner and the creator of Gmail, comes into play: seek the 90/10 solution. These are solutions that may not be perfect, but they are good enough to launch your product and get it in front of customers quickly.
As mentioned before, users will tolerate an imperfect product if it addresses a “hair-on-fire” problem for them. Developing these 90/10 solutions can be a startup superpower, allowing you to solve urgent problems faster and learn from real-world feedback.
However, use this advice judiciously. In scenarios involving financial transactions or life-and-death situations, you need to prioritize reliability and safety above speed. In these cases, the “good enough” philosophy may not apply.
Running a startup requires the judicious balancing of priorities. By adopting strategic metrics and the 90/10 solution approach, you can channel your efforts effectively, drive growth, and respond quickly to your customers’ most pressing needs.
Product-Market Fit (PMF)
The Real Product-Market Fit
Throughout this guide, the term PMF, or Product-Market Fit, keeps cropping up, and with good reason. It’s the critical foundation of your early-stage startup, the one thing you should be laser-focused on. Without it, nothing else matters.
Seibel, in his video “The Real Product-Market Fit,” gives us a good idea of what PMF looks like and how to tell if you’ve achieved it:
• When customers can’t get enough of your product, snapping it up as fast as you can produce it, you’ve hit product-market fit.
• The market is your guide. Understand its needs before you make a solution.
• Pinpoint customers with an immediate, pressing need — a “hair on fire problem.”
• Create a minimum usable product, release it into the world, and pay keen attention to the feedback.
• Once you’ve achieved PMF, it’s time to refine your product, expand your team, and make strategic investments.
Emmett Shear (CEO of Twitch) describes PMF as a tangible shift in momentum, comparing it to pushing a boulder uphill, then watching it roll down of its own accord. As an investor and advisor, I like to tell founders and other aspiring entrepreneurs that once you pass this stage and enter the growth stage of a startup; the boulder becomes your customers chasing you down the hill almost as fast as you can keep up with demand, and if you can’t execute consistently, the boulder will overwhelm and crush you under its weight. Once you achieve PMF, it’s up to you to execute properly and hire the right people to make sure you can scale to keep up with exponentially increasing customer demand while still staying true to what made your initial customers love you and made your company so great in the first place. The growth stage is also the most exciting part of a startup in my opinion, that is, if you are fortunate enough to reach this point in your startup journey.
The Only Thing That Matters
Marc Adreeson (Cofounder of A16Z and Netscape), in his article “The Only Thing That Matters,” labels PMF as the definitive game-changer for startups. It’s an exhilarating time when customers are clamoring for your product, your bank balance is growing, your team is expanding, and the press can’t get enough of you.
Adreeson refers to Rachleff’s Law of Startup Success, which warns that the lack of a market is the #1 killer of companies. The corollary to this law highlights that achieving PMF is the ultimate goal.
A startup’s journey is bifurcated into two distinct phases: before and after achieving PMF. Your focus early on should be achieving PMF. Once there, your success is generally attributed to this accomplishment.
How to Find Product-Market Fit
Rahul Vohra (CEO of Superhuman) shares his roadmap to PMF in his article “How Superhuman Built an Engine to Find Product-Market Fit.” He takes inspiration from Sean Ellis (coined the term “growth hacker”), who devised a leading indicator of PMF — asking users how they would feel if they could no longer use the product, and assessing the percentage of those who would be “very disappointed.”
To unlock PMF:
• Evaluate feedback from users who would miss your product the most. Discover why they love it and what barriers prevent others from feeling the same.
• Strategize a roadmap that magnifies what users adore about your product and tackles the obstacles preventing wider acceptance.
• Track your PMF score religiously, making it your key metric. Review it weekly, monthly, and quarterly.
• Remember, growth comes easier when your PMF score is high.
Additional Resources on Product-Market Fit
For additional information on PMF, check out these resources:
• Andy Rachleff’s discussion on “How to Know If You’ve Got Product-Market Fit” (Andy is the originator of the term):
• Elad Gil’s take on “When do you know you have Product-Market Fit?”
Remember, the path to PMF may be challenging, but it’s a journey every startup must undertake if they ever wish to reach the summit of success. PMF is the pivotal factor in your survival and a precursor to growth. Keep iterating, keep learning, and keep pushing that boulder up the proverbial hill. The roll downhill will be worth it. Trust me.
Real-World Examples of Startups that Have Followed this Essential Startup Advice
Here are a few examples of startups that have followed these principles:
1. Airbnb: The founders of Airbnb, Brian Chesky and Joe Gebbia, initially came up with the idea to rent out air mattresses in their apartment to help cover their rent. They realized there was a much larger market for this kind of service when they received a tremendous response. This aligns with the principle of making something that solves a problem you yourself have, understanding users, and adjusting your idea based on user feedback. Today, Airbnb is a multi-billion-dollar company with properties listed in over 100,000 cities worldwide.
2. Brex: Initially, the founders of Brex wanted to create a virtual reality startup but pivoted to FinTech when they realized their business credit card concept had more potential. They started Brex with just the bare minimum features, aiming to gain feedback from initial users and iterate quickly. They focused on a small group of users who needed their product badly even in its early stage, an excellent example of “finding 10 customers who love us”. Today, Brex is valued at billions of dollars.
3. Dropbox: Founder Drew Houston conceived the idea for Dropbox after repeatedly forgetting his USB drive while he was a student at MIT. He created a product that he himself needed, staying true to the principle of making something that people want. To validate their idea, they made a simple video explaining Dropbox and posted it online, gauging the reaction of potential users. This tactic helped them understand their users, a key tenet in startup success. Dropbox now has over 700 million users.
4. Slack: The team communication tool Slack was developed by a team working on a completely different project — an online game called Glitch. When the game failed to take off, the team realized that the internal communication tool they had built for their own use had potential. They made something people want by solving a problem they themselves had experienced, eventually creating a platform that’s used by millions of people every day.
These examples show how successful startups have followed the principles of making something that people want, focusing on a small group of dedicated users, and being open to adjusting their ideas based on feedback and market realities.
Need help coming up with startup ideas or fleshing out your existing ideas? Read my articles on How to Recognize Business Opportunities and Validate Your Ideas and How to Shape Business Opportunities through Business Model Generation respectively.
The Road Ahead
Keep in mind that while the advice shared here can guide you towards finding product-market fit (PMF), success is not guaranteed. The entrepreneurial journey is a winding road, filled with obstacles and uncertainty. It’s important to embrace the challenges, learn from them, and enjoy the ride.
Always treat others with kindness and respect, and don’t forget to take care of yourself along the way. Embrace failure as a steppingstone to growth, not as a setback. Success in this entrepreneurial world isn’t solely about winning or losing. It’s about staying true to your convictions and giving your all in every endeavor.
So go forth with this mindset: learn from your mistakes and do your best in all you undertake. In the grand scheme of things, that’s what truly defines success.
Need help on your startup journey? Whether it’s about growing sales for your business or building a world-class engineering team, I can help.
