The Startup Journey

Intro

The thing with startups is that they are unintuitive. Most of the things you learn in business school are not only not applicable to startups, but actually harmful to progress. So in this module you will get a real look of what the startup journey looks like. We are covering the different stages of startups, what matters at each step, and share what most people tend to get wrong.

Defining a startup

Building a startup can be defined in its most fundamental way as solving a problem some set of people have in a better way than what exists today.

It's not about building from a fantasy you have of how the world may work.

The reality is simpler: just make something people want. Nearly everything you need to know about a startup can be broken down to this statement.

Why not to build from a "vision"

The reason building from a vision doesn't work is that in the vast majority of cases, your vision is filled with bias and a distorted view of reality. Too often do founders spend years building something to only then find out that no one wanted the thing you are making.

You cannot force your will down people's throats. Thinking that you can convince the world into your vision of a future doesn't work. So most often when you hear some startup declaring this new and novel vision they are building, it is a sign of failure. It might give the illusion of success in the short-run but you shouldn't be fooled by that. The world works differently.

How a startup works

The better way to think of a startup is to think of it as a research project. You are trying to find truth in the market. Discover a new way to solve an existing need. Or an unmet market need all along.

The only source of truth for this is the market or physics. Not your illusion of being brilliant. And the way you find truth is by coming up with hypothesis which you then test through real experiments and actions. Not powerpoint slides or market research.

Product-market fit (PMF)

While looking for truth in the market, you can think of this search as a search for product-market fit. For a startup, there are 2 variables.

• The market you want to serve (which is a set of people in the world with some set of shared criteria).
• The product you are building (which is the solution to a given problem you are building).

When you find the right product for the right market, you've found truth. Which is the basic condition for building a real company. An important qualification for product-market fit is that the market you defined actively wants your product.

If you are begging people to use your product, you are likely building in fiction land and not the real world. This might not be crystal clear from the start, but you are testing for early signals that inform the direction you should be going toward.

Before PMF

Finding PMF can take years. Most startups don't get there. And this is why so many fail. They run out of money before finding something that works (=pmf). Many startups started with one idea but through iteration and looking for truth in the market ended up building a completely different idea.

The months before PMF can look very weird, confusing, exhausting, and difficult. Because if you have adjusted your hypothesis 6 times already, you may start to doubt yourself. But this pre-PMF time is something you cannot skip. And you must resist the temptation to go into "execution" mode before finding real pmf.

At this stage, everything that is not getting you closer to PMF is a distraction and something you shouldn't be doing. This includes premature growth initiatives, hiring too many people, making fancy decks, or anything else that doesn't get you closer to finding truth in the market.

How to find PMF

In pre-PMF land, you are playing the game of coming up with a good hypothesis, building the basic version of the product, testing it in the market, and learning from that. The more good iterations you do on your hypothesis the better. The mechanics of this are simple:

• Come up with a hypothesis of a) the problem, b) who has that problem, and c) what solution you think solves that problem well for your market.
• Test your hypothesis by building the solution in the most fundamental way very quickly. Give to to real people. And watch how they are using (or not using) it. Talk to them.
• Learn from the experiment by having a radically honest view on what people are telling you. Remove your preference or bias, but look at the real data.

If you go through this loop enough times you will get incrementally closer to PMF. This is the only thing you should spend time on as a founder in the pre-PMF stage.

An important point worth stressing is that you must talk to your customers a lot. Product analytics or emails is not enough. Through talking and doing good user interviews, you discover the real problems and struggles. This is the greatest source of learning. If you don't talk to >5 customers every week, you're doing something wrong.

Focus on few people

It's bad to start out building a solution for everyone because you are then at risk of building a solution for no one. It's better to make something 10 people desperately want and need than something 1000 people sort of like.

The reason founders get this wrong often is because they have this false reality of needing to convince investors of a huge market you are going after that can be worth billions. But this is something that naturally emerges as you go. Because once you dominate one segment of a market, it is easier to go and apply this to other segments.

So whatever "advisors" and "experts" are telling you, ignore it. First make something a small group of people desperately want and need. On a global scale, these "tiny markets" can already be worth millions.

Pivoting

You can split the iterations you do into 2 categories: incremental iterations and radical iterations. An incremental iteration is if you change one of the following variables of your hypothesis:

• The initial target market
• The problem you are solving
• The solution to the problem

A radical iteration is when you change more than one of these variables at the same time. This can be referred to as a "pivot". Which is just another word for drastically changing your initial hypothesis.

After PMF

Defining PMF is not a binary condition that is met. It's not either true or not. But rather, it works like a continuous variable where you get incrementally closer to stronger pmf. While this is true, there is a clear line you can draw.

• Pre-PMF you are pushing a rock up a mountain.
• Post-PMF you are running after the rock because it is rolling down the mountain.

This can be more formally defined as growth. The moment you are growing consistently every week in your north-star metric (e.g. revenue) is the moment you have evidence for PMF. This assumes that your growth doesn't scale with the money you spend (e.g. just running paid ads as your input to the growth rate).

The dynamic of how you run the company shifts once you hit this milestone of PMF. You move from research focus to execution focus. And now you start optimizing the different input variables to your business success. Importantly, the search for even stronger PMF doesn't stop. And this fundamental mindset will remain with you throughout the lifetime of the company.

Ignoring advise

As motivated earlier, you should ignore nearly all advise floating around the internet. VCs, experts, professors, and even some set of entrepreneurs might be good at their jobs but terrible at giving advise for real startups.

If you're lucky to have someone who has gone through that journey and understands why startups are so counterintuitive, they can help. Although you need to understand that you are the only person who is close to the ground truth. And advisor cannot find ground truth in the market for you. Experiments beat opinions.

Defining success

As you might suspect, funding rounds, press articles, or social proof are not what success looks like. More often than not, they correlate negatively with the success of a company. Because most of the world still thinks about startups in the wrong way (they are counter intuitive).

Once you understand what truly matters, you see through the illusion of success. And know that finding PMF is the only thing that matters for a company in the early days. You can safely ignore the inferiority complexes you are feeling because someone announced a big seed round. This is all noise.

Capital is not the input factor accelerating finding PMF (given you have capital to work on your startup full-time). Better iterations, better experiments, and better hypothesis are. And the speed at which you execute on them.

So success for a startup looks like this: talking to a lot of people, identifying a real problem, building a magical solution they love, and iterating until you land on something customers are pulling out of your hand.

The way ahead

You don't learn how to build a startup by reading about it. Just like you don't learn how to ride a bike by reading about it. It requires you to take real action. And go through the reality described above.

The next modules are focused on going much deeper on all of the subject touched upon above. You can dive into them by any order.