Lessons I’d share with my 23-year-old self before I founded a startup.
95% of startups will fail. Less than 0.1% will see billion dollar success.
If your startup fails, you’re left with something intangible as its founder: your learning and experience.
Staring at the ruins of my startup, I couldn’t help but wonder if learning was quite the consolation prize it’s touted to be. That’s not the most rational analysis of failure though. If anything, the failed startup can prepare you for the next product you build and the next challenge you take on.
In this post, I want to reframe what it is I learnt about building useful products and viable businesses as a result of my startup.
This is an incomplete list. I have only just scratched the surface of all there is to learn on these topics. It is what I’d tell myself before I started up. It may not be applicable to every startup.
I have covered these ten areas below: ideas, customers, teams, products, metrics, usability, pivots, funding, diversity, and mental health.
There’s something almost romantic about the assumption that the success of a startup is determined by the brilliance of its idea.
That’s simply not true. A startup and its product is only successful if it solves a problem for real people in a meaningful way.
That’s good news because it means we can follow an analytic process to determine what problem we can solve and for whom.
There’s no way to tell whether an idea is really good, there’s no quantitative or qualitative data you can collect on an imaginary construct. If you can instead think of the underlying problem you imagined you could solve with your idea, you’ll be on firmer ground.
So, instead of saying “we should make an app for applying to jobs with Tinder’s swiping interface”, you think about the biggest problem job applicants have in the first place. In this example, there’s an undefined problem: is this startup helping job seekers apply to jobs faster? Is the tedium of applying to jobs the most painful problem job seekers have?
“App”, “Tinder”, “interface” are solution ideas.
Be solution-agnostic. What is the problem you could solve for people?
🙎🏽 On customers
I feel like this is the most important point in the list and the easiest to miss. Once you find a compelling problem, it’s important to know if people really want it solved. If so, who are these people and how do you reach them?
Starting out, it’s much easier to build a product that precisely meets the needs of a well-defined, small segment of people to use, rather than trying to appeal to a broad or “mass” audience.
This means you’re looking for a group of people who:
- feel severely affected by the problem;
- are actively trying to solve it using inadequate solutions;
- would be willing to pay to switch to a better solution right away.
Don’t be too tied to your problem hypothesis. You might find that a different group of people experience it than you’d expected. Or you might find a different problem altogether that fits this criteria.
It’s easier to rely on your intuition if you belong to such a niche customer segment, but it’s not a good idea to skip customer research altogether on the basis of it. How do you know if this is a problem for people besides yourself?
👯 On teams
If you’re uncertain about working on this, is it merely impostor syndrome? Do you really want to dedicate five years of your life to working on this?
A startup can’t be an attempt to escape corporate life in a blaze of glory. Neither can it be motivated by dreams of fame and riches. Working as a software engineer or investment banker is a more reliable way to accomplish these goals.
Doing a startup for the sake of doing a startup isn’t a good idea.
If your focus instead is on trying to solve a meaningful problem that you see in the world, you’re likelier to persevere through the daily grind that it entails. You’re likelier also to be able to leave your ego at the door and focus instead on making tough calls to get things done. A startup holds no promise of grandeur, it’s merely an exercise in creating a useful product and viable business. The focus has to be on short-term business goals that are met by doing unglamorous daily labour.
If you and the rest of the founding team are up for that, get in writing everyone’s role and equity stake. Do this once and table the discussion.
It’s better to divide the tasks in a team keeping in mind everyone’s unique strengths and skills. Setting firm deliverables likely won’t work at an early stage, the nature of the work is too unpredictable.
Before making a new hire, it’s imperative to do the role yourself first for a few weeks. It’s hard to hire a good coder, marketer, designer, if you don’t know what their job entails or can’t assess their skills.
🔩 On products
There’s a tendency to want to start at this exciting “build” stage, but you’re likely in a better position to do so only after customer research. How would you address the biggest pain point you discovered in your research through design? That’s not easy. The first few products you sketch out on paper will likely be the most obvious solutions to that problem, not the best ones.
Elon Musk recently popularised the idea of “first principles”, the technique of stripping a problem “down to the most fundamental truths, and then reason up from there”. Question everything about the product ideas you’re coming up with: does the problem have to be solved with an app or would an email newsletter suffice? Does it really need ten features instead of one?
Do at least a few iterations before picking on one to turn into a Minimum Viable Product. An MVP doesn’t have to be polished, just functional. The target audience of an MVP isn’t a crowd of thousands, it can be released to, say, twenty people from your customer segment. Make the differentiation between an MVP and a fully featured product for wide release.
The purpose of an MVP is to test the assumptions that you’ve made in matching a solution to the problem. As David J Bland puts it, “while you decide what’s Minimum, the customer determines if it is Viable.” Get it out the door to find out.
This is a tough iterative process requiring objectivity and perseverance.
If your team is in love with an idea or solution, it would be hard to remain objective when making tough decisions about it. If your team is in love with a meaningful problem, it’s feels worthwhile to persevere even when your “team doesn’t come across the right solution on the first, second, or Nth try”, as Julie Zhuo puts it in her brilliant piece.
📈 On metrics
Just before getting an MVP out the virtual door and in front of customers, it’s important to decide what metrics you’ll use to measure success.
There are vanity metrics: time on page, clicks, signups. It’s great to measure these, but pre-product/market fit, perhaps the most important is retention. Driving as many people as possible to a new, flawed product is like pouring water into a leaky bucket. You just want enough people to help you understand and fill in the gaps in your product.
What’s the right measure of how much someone uses and likes your product? It could be multiple visits but in conjunction with something more specific to your product, like “stories read” for a news product or “tasks completed” for a productivity tool.
To figure out what metric ought to determine whether your product is a success, think of the ultimate goal of your product. Is it to help people be more informed? What’s the best metric that can measure that?
Deciding what to measure before releasing a product is always a good idea because it aligns the team to one goal. It also makes it easy to analyse and learn from the results you get.
I did multiple iterations in my startup that didn’t succeed, only one failed. This was because we didn’t decide what to measure, which made it very hard to learn any lessons from it that could be applied to the next iteration.
As your MVP develops into a fully-featured product, you’re likely to give more weight to acquisition, activation, revenue metrics, not just retention.
🔬 On usability
Quantitative data tells you what happened, qualitative tells you why.
It’s essential to understand your users’ experience using your product through observation and testing. People are notoriously bad at imagining and articulating what product they want. The best you can do is understand what problem they’re having presently and why.
Observe their experience interacting with your product. Do they hesitate to follow certain processes or feel confused by them? Are they intimidated or frightened by your product? Is it simply inadequate for their needs?
In designing a usability test, make sure your users feel comfortable to express their concerns. It’s not their fault or yours if they’re having a poor experience, it’s just a signal that the product needs improving.
What simple tests are appropriate for your product?
💫 On pivots
So far, the process we’ve followed is to start with a problem hypothesis, speak with customers, find a painful problem to solve, design solutions to it.
hypothesis -> customers -> problem -> solution
In practise, developing a useful product isn’t a straightforward process.
Pre-product/market fit, it’s likely you’ll have to make at least a pivot or two in each of these areas: customer, problem, solution.
A problem pivot is when you find in your research a different problem that is felt more acutely by a customer segment. In this case, you can switch gears and work on the problem you discovered. In speaking with people from multiple niche customer segments, you might chance upon a group whom you might be able to serve better. If you feel strongly about solving the problem for this group instead, you could make a customer pivot. If you’ve found a customer segment that is severely affected by a problem but your solution doesn’t quite fix it, you can make (multiple) solution pivots.
Post product/market fit, you’ll likely end up making changes in your tech or growth strategies.
💰 On funding
Perhaps the best advice I got on funding was that investors look for five things, it’s better to be a 10/10 on one of them, than a 7/10 on all. They are:
- Team: has your founding team previously set up successful startups? It’s crucial to have a good team, but this isn’t likely to be the sole factor for a decision to invest.
- Idea: is your idea so brilliant that it warrants funding? This is rare.
- Tech: is your tech so novel that after playing with it for a few minutes an investor is convinced of its potential? For software, this is becoming rare.
- Traction: is the user base growing? Do users love this product?
- Revenue: is the monthly recurring revenue growing?
For most startups, having a good team and either strong numbers for traction or revenue is key when seeking funding. You’re trying to create a viable business here, numbers like burn rate, active users, ARPU, growth rate matter more than any pitch or plan on how you could make it work if you just had the funding.
But to create a viable business, do you need external funding at all? Or can you attain your business goals by bootstrapping or self-funding?
There’s sometimes a dislike for the term “lifestyle business”, a viable business that doesn’t necessarily experience hockey stick growth or make more than a few million in revenue a year. Don’t fall into the trap of believing that only billion dollar success matters. If you can create a healthy lifestyle business around your product, then do.
👚 On diversity
Diversity is important in a startup, even at an early stage.
There’s ample evidence that diverse teams make better products. By having people on your team with varied perspectives on life and the problem you’re solving, you’re likelier to speak to customers from often underserved segments, build for them, serve them.
Again: a startup exists to solve a problem for people. A majority of startups in the States and even in Asia end up focusing on customer segments that are en vogue like millennials, techies, san franciscans. This is unnecessary.
This is not to say that a problem that you or your peers experience aren’t worth solving. But there are substantial problems that exist in the world today in almost every market. If you’re looking for a meaningful problem to solve, you can find them beyond your immediate purview too. What markets are broken or inefficient in America or developing countries?
Can you solve unglamorous but real problems for underserved communities like career-focused women, elderly people, parents with kids under 14, or farmers in a developing country?
Diversity isn’t about quotas, it has a direct impact on your team’s overall empathy. And it can help you find and understand such issues.
☀️ On mental health
There’s no need to sacrifice yourself at the altar of your startup.
A startup can feel all-consuming, but it shouldn’t take precedence over your physical and mental health. The modern day fairytale of startups can have you believe that to build something great, you must work on it day and night, week after week, eating ramen, sitting cooped up in a room all day, sleeping too little, ignoring friends and family. Don’t fall into this trap.
A startup cannot succeed if you’re running on fumes. Even if it did, that success would come at too high a cost.
Think of this as merely a learning exercise in how to build useful products and viable businesses. It’s the best education you can get on the subject. Reframing it like this can take the pressure off for when your product iteration, or startup itself, fails.
The startup is a part of your life, an important part. The startup isn’t all of it.
Whether it succeeds or fails, you did ok. Try and remember that.
If anything, it’s prepared you for the next challenge you take on.
Thanks for reading. Please note: All rights to this piece belong to the author.