In the last week, I have read two blog posts by two studs who I really respect; Andrew Chen and Tim Huntley.
Both are addressing THE fundamental issue for all startups – Product/Market fit. Andrew does a great job of articulating the metrics for various types of tech companies. As part of the Lean model of Build-Measure-Learn you gots to measure but measure what? Early on it is very easy to measure the wrong stuff. Read this if you are a tech startup. Read this if you support tech startups to best understand what areas they need to focus on.
Tim’s post today really brings the broader product/market fit to a head. Tim is an Entrepreneur-In-Residence here at TSF. He is the dude as he delivers great insights with a perfect balance of directness and a smile. Don’t be mistaken with the smile reference, he takes his role in TSF and the greater Triangle very seriously. Tim’s point is that most startups get off on the wrong foot by concentrating on the wrong thing – product development. Start with the customer and figure out what they want first.
Both of these posts brings me to my big concern for the Triangle.
The pressure to execute product/market fit is high here.
I believe there is a lot more room for mistakes in NY or the Valley. Professional investors (those that make multiple investments per year) think of their investments as a portfolio in which they understand that a number will fail, a number will limp along and a few will be successful. Our capital deficiency exacerbates this by making less gross # of bets. I frequently think of the region’s portfolio and the portfolio is more like 5-8 companies not 50-80 or 500-800. This means that those bets better execute perfectly to create region success. Which is why I think daily about how we advise startups to use their capital (investment dollars and time) perfectly.
One of the DropBox founders shares his definition of product/market fit in this manner and I paraphrase, “if you shut down your product tomorrow, would a minimum of 80% of your customers freak out”.
That is how high the bar is. Do you have any idea how to get there?
I always used the “3 legs of the stool” metaphor with either my companies or companies I was helping.
All product comes from the ” 3 Cs”:
3) Company (your internal insight and serendipity).
All product development meetings should have 4 people in attendance:
1) Head of Sales (customer – what they want, what they like about your product, what they don’t like about your product, what competitors are going to offer – including price).
2) Head of Marketing (competitors – what their products currently have that you need to add/ignore, what they will be developing and when, pricing, pricing, pricing)
3) Head of Technology (company – what can your company do to make your product better, faster, cheaper; what technological advances should be incorporated in your product and when; what is not feasible; what is feasible and a realisitic “when”)
CEO – listen, talk, make the decision , take responsibility