These Are the 7 Deadly Sins of Product-Driven Founders
Are you making any of these company-killing mistakes?
“It doesn’t matter how great your original product or idea is, if you can’t build a great company, then your product will not endure.” — Brian Chesky, AirBnB
Many product-driven founders become overly obsessed about building a product before everything else.
Yes, you need a product and the vision to coalesce a team around, but a great product by itself, is not enough to scale. Not only can this focus become a growth-limiting myopia, it can unfortunately cascade into other mistakes that can torpedo even the most promising idea.
How can this be? After meeting hundreds of founders, and drawing from my own experiences as a product-driven founder, I’ve collected some of the blind spots that stunt and even kill the growth of the most brilliant and well-designed product-driven startups. Here are the seven deadliest mistakes I see product-driven founders make:
1. Not moving past the classic product founder fantasy (“If I build it, they will come”)
Product founders have so many superpowers. You may incorporate design thinking to design an elegant, useful and even delightful product experience. You might even have a special genius for scratching your own itch, or your user’s needs, by developing a thoughtful, empathetic product. But none of these is enough. None of these will help you make the transition from “project” to “business,” let alone to “fundable business” or even beyond to “unicorn.”
Remember: The forgotten gap between project and business is “monetizability.” The gap between business and fundable business is scale. The gap between fundable business to vastly profitable and even unicorn-sized business is that all of those things have to work, and the team needs to execute like champions: making the right decisions on markets, acquisitions, product focus, and key hires. In complex markets like health tech and edtech, the structural challenges in getting to a buyer are so great that starting with a product (even one that solves important user needs) may be a death sentence. Paradoxically, some of the most successful companies start with a payer and work backward, rather than starting with a problem and trying to find someone who will pay to fix it.
If you’re not aiming all the way to unicorn, that’s fine. But, if you are aiming for an extraordinary $100M+ exit, you can very rarely get there without discipline and a huge dose of market orientation. Two examples which illustrate this are AirBnB and Firebase. VRBO and HomeAway predate AirBnB by a wide margin. AirBnB basically copied their product concept and packaged it in a way that was appealing to younger, more urban users than any of the other services. They didn’t have any major conceptual product insights, though they did make a few improvements (e.g., large pro photos of listings taken at AirBnB’s expense). Their success was about the legwork surrounding the product — specifically customer acquisition — more than the product itself.
Another great example is Firebase (full disclosure: we were early investors). Their product was new and novel, but more importantly, James made sure to socialize the product with key influencers at every stage. It was their support that helped it get traction in its early days. There is more on their story here.
And of course, there is a reason why the world’s most legendary “product founder” actually deserves more credit for his marketing genius. Not a single iconic i-Product succeeded until after Jobs figured out the compelling, must-have value proposition for consumers — often a subset of the thousand possible product benefits (“a million songs in your pocket”).
2. Not testing willingness to pay (WTP) early enough
Please don’t be too snobby to include financial considerations and willingness to pay (WTP) as an absolutely critical design consideration for your product. You must test WTP *very* early on in your product’s development so that you don’t go on a long, expensive path that ultimately proves your product is a failure. Simply put, what if adoption of your product hinges on price, yet you fixate on and then optimize for an unrealistic price point?
Yes, your product (in whatever category) may be drool-worthy and gorgeously designed, but that simply isn’t enough to overcome your customers’ resistance to an unvetted price point. In hardware, this sin can indeed be tragic. When you’ve chosen materials, a manufacturing path, months or years iterating and polishing an early version — all before testing in the market — the last thing you want to discover is that no one will pay for it!
We often ask:
- Is this team familiar with the purchaser (specific person or role) at the buyer’s organization and can they successfully get to them?
- What considerations are involved in the buyer’s purchase decision?
- What possible obstacles exist to the sale? This includes difficulty moving to a new solution, lack of defined budget, long sales cycle and the huge one: inertia, or the “good enough” problem
- Is the value proposition enough of a multiplier to overcome said obstacles? (think 10x better not 2x)
There is a wonderful piece here that offers another case study on this phenomenon.
3. Solving for user problem rather than buyer pain point
Because you’re so passionate about fixing your target user’s problem, it’s often tempting to skip the step of verifying that there is actually a buyer pain point too; that is someone will actually pay to fix it. (I have been guilty of this one, so I can especially relate.) A symptom of this mistake is when your pitch includes the line “this problem needs to be fixed,” but there isn’t anyone identified with a budget to fix it. Unfortunately, monetization won’t miraculously emerge later on for your company — it just doesn’t happen that way.
Even if you serendipitously stumble onto a business model, you have a long, painful journey ahead of you to find product-market fit that could simply be avoided by focusing on addressing a buyer’s perspective from the start. While prospective users will always “ooh” and “aah” over the promise of a product, or even an early version, if they’re not willing to commit with their wallet or their time… well, as a more famous person than myself said, nothing matters after the “but.” That’s why it’s so essential to never skip the question: “are you ready you purchase this?” — closely followed by a sign-up sheet or letter-of-interest to capture purchase intent.
As far as addressing your buyer paint points, a great deal has been written on validating the market for your idea (this, this, and this) and I don’t need to repeat it all here. Suffice it to say; you ignore the market part of your design research at your peril.
4. Not knowing how long your sales cycle is going to be
You might be wonderful at user research, but you could hugely benefit from spending a few user testing cycles on understanding the buyer persona and use case. This is crucial for understanding your adoption curve and how you should staff and fund your startup. From my previous experience as the founder of my own startup, it took on average 18 months to close a sales deal, and that weighted down and ultimately torpedoed our growth.
A few anecdotes which may illustrate some of the scenarios I have seen: an enterprise SaaS platform with a high average contract value (ACV) of $250K, but an 18 month sales cycle may struggle to get customer feedback in a timely way to iterate before they run out of founder (let alone investor) cash. Contrast this with a $500 a month product with a 10-day lead-to-contract cycle, where the team can learn from feedback and iterate many multiple times in that same window.
The most critical aspects are: who exactly the buyer is in an organization, who makes the decision, what influences them, and perhaps most critically, how long it takes to go through the entire decision-making and buying cycle. In other words, how long can you realistically project the sales cycle to take? If a founder can’t answer these questions, I do not consider them to be sales ready.
Luckily, all of this is eminently testable. The key thing to remember (with credit to Eric Ries) is to treat your sales process itself as something you are iterating on and testing.
Sales cycles can dictate how long you need to wait before meaningful validation of your value proposition — but the hidden, ultimately more significant cost may be to your learning curve.
5. Misunderstanding MVP
Lean Startup gurus Eric Ries and Steve Blank have written seven books between them, but I still find founders laboring under an inadequate understanding of what exactly a minimum viable product (MVP) is.
Basically, if you find yourself going back to your engineering team time after time, saying “one more feature, and then they’ll buy,” the likelihood is that you’re a fat startup, not a lean one. You probably already know that an MVP contains the minimum feature set needed to get a customer to buy, but the real key is being able to distinguish the critical features — ones that customers will plunk down a credit card for — from the vitamins and nice-to-haves.
It is a truism that enterprise SaaS products can be absolutely bare bones but functional to succeed and I often advise pre-seed and seed founders to focus on over-optimizing for sales rather than product before their A round. Unless there is some intriguing, incredibly unique core technology, very few startups get funded because they have over-delivered on their product roadmap, while the reverse is absolutely necessary.
There are also consumer examples like Twitter (who have barely altered their basic format in 10 years). There are always counter-examples, but in this more mature technology landscape, if you don’t see big traction off the simplest thing you can build, it might be more valuable to go back to the drawing board than to add deck chairs to the Titanic.
6. Not designing your company with adoption curve in mind
If you don’t understand your users’ adoption curve of your product/service, then you have put on blinders as a founder, which will make it incredibly difficult to design your company for success. Your customers’ ramp up will absolutely affect your spend and staffing (i.e., how short or long your sales cycle is will determine how many salespeople you should hire, and what kind) and this is why it is crucial to get a sense of this quite early on. A few questions to think about: Is your product freemium or paid? Will you do inside sales or paid customer acquisition? Is the first experience high touch or low touch? Each of these leads to a fundamentally different user adoption curve and requires a different team in place.
For example, I recently met an enterprise SaaS team who were trying to scale a beautifully-designed productivity tool used inside an organization. Unfortunately, the use case they were meeting was far more of a vitamin than a pain pill. It was perfectly suited to freemium, where you can try something out and slowly fall in love over months (or years); rather than a quick purchase upon getting swept off your feet or for stopping a bleeding problem. However, instead of planning and preparing for a Github-like freemium rollout, they expected to hack their adoption curve through better marketing and customer support and, therefore, their burn rate was astronomical: they had a half dozen full-time engineers and only one sales hire. It frustrates me when I see that a team is squandering an incredible product, due to a misaligned roll-out, staffing and scaling model.
My personal favorite book, if you want some more tactics to try, is this one or you can also learn immensely from the case studies over in the GrowthHackers.com community. Finally, remember that if sales just isn’t your thing, hire or partner with someone who is great at it (I wrote a whole post on why and how here.)
7. Not aiming for white space
Creating a brand new product to address an existing competitor’s shortcomings can be great. In fact, there is even something to be said for coding a better clone of Instagram/Tinder/Things while you are learning that new Python framework. But as markets mature — and if you want to build a huge, disruptive company — you need to be strategic about how the landscape has changed.
For one, acknowledge that there are tipping points in technology markets where certain advantages go to the incumbents. It is unquestionably more challenging to build another Diapers.com today, or Instagram — or insert other expensive acquisition here — because of huge incumbent competitors, who have reached the scale where it’s cheaper to buy you out than to let you steal away market share. But that’s the most obvious threat — and maybe it’s even a win for an entrepreneur. The harder and more often overlooked challenge is brand building: a huge part of the campaign to go from 100K users to 10M can involve (gasp) paid marketing, and it can be more complicated and expensive than you think. Sometimes, there are also non-trivial switching costs faced by the second, third and fourth movers in a market. Just look at Salesforce, an 18 years old SaaS that is the lingua franca of many sales teams. Better competitors? Yes. But good luck convincing companies who have been using Salesforce for years (and the resultant training and data investment to move). Innovators sometimes underestimate the impact of inertia on the decision-making of people who don’t think as they do.
The reality is that unseating an incumbent is costly. And, if you are only differentiated by a few product dimensions, it’s possible that your giant competitor will launch your killer product feature and make you irrelevant, then you will somehow acquire all of their unhappy users.* (Hurts to say it, but true!) You need to know whether your product differentiation is enough to get existing users to jump ship AND move all their data. And, based on all the product feature pitches I’ve seen, I’d say that you will have a far better chance at unseating your Goliath opponent, if your product is built based on a different paradigm of the user, or a different understanding of where their pain is, or a different way of acquiring customers, than just because your product feature was better.
It is a fact that a startup needs to think about disrupting a big player differently now, than they did in 2007 or 1997 — know your strategy, and be aware that in a far more mature technology ecosystem your go-to-market becomes as or more important than your product differentiation.
So, while white space is becoming harder to find, there are advantages to trying to seek it out if you want to build a big, scalable business. The David-and-Goliath examples for every point I’ve made here abound (from Snapchat to Ipsy to Veeva) so if you feel very confident about your slingshot abilities (or are a master guerilla marketer) don’t walk away from the fight — go in with your eyes open.
Now, go create, make, disrupt. Just make sure that you don’t fall into these traps so that you can get out of your own way and bring your genius product to the biggest possible audience. The world awaits.
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