Humans are one of the most awe-inspiring creatures that have ever graced this planet. Even though we don’t have the sharpest claws or toughest skins nor can we innately survive -50 degrees Fahrenheit, we’ve crafted tools and environments to help us survive in brutal nature. But arguably, our greatest trait is that we’re capable of writing huge epics that transcend our individual abilities and contributions. And share these narratives to inspire not only ourselves but the fellow humans around us.
A member of the our proud race, founders are no different. They are some of the greatest forecasters out there. To use Garry Tan’s Babe Ruth analogy, founders have the potential of hitting a home run in the direction they point. They build worlds, universes, myths and realities that define the future. They live in the future using the tools of today. In fact, there’s a term for it. First used by Bud Tribble in 1981 to describe Steve Jobs’ aura when building the Macintosh – the reality distortion field.
Yet, we humans are all prone to anxiety. A story nonetheless. Simply, one we tell ourselves of the future that restricts our present self’s ability to operate effectively. Anxiety comes in many shapes and sizes. For founders, one of said anxieties is attempting and worrying about the future without addressing the reality today. In the early days, it’s attempting scale before achieving product-market fit (PMF). Building a skyscraper without surveying the land – land that may be quicksand or concrete.
Here are four signs – some may not be as intuitive as the others:
The snapshot
- Your code architecture looks beautiful.
- You’re onboarding expensive experienced talent.
- Your cultural values lag behind the talent you hire (plan to hire).
- You’re bundling the market before you unbundle the needs.
1. Your code architecture looks beautiful.
In the early stages of building a startup, your main focus should be to get to PMF. The proverbial “one” in zero to one and one to infinity. Spend time focusing on go-to-market challenges. After you’ve found your highly fragmented market with low NPS or you think your earned secret gets you right on the non-consensus (more on finding idea-market fit here):
- Does your market actually want/need your product?
- Are they spending time, energy and money to where their mouth is at? In other words, are they speaking with their wallet?
- On time/energy… what do your 30- and 90-day retention cohorts look like? Are they at the very minimum above 20%? Ideally at 40%?
- Are they engaging with the product? What does your # actions/session metric look like? Rather than just # sessions/week (/day or /month)?
- What are the leading indicators that your users are not enjoying your product? How can you focus on preventing churn there?
- Are your engagement and retention metrics directly correlated with your top line?
- Are they inviting their friends?
- On money… are they renewing their subscriptions? Are they customers or buyers?
- Customers are people who come back to your business again and again because they love your product and the team that delivers and behind it.
- Buyers are people are one-time purchasers. They pay for the product once and never come back. It’s the feeling of: “I’ve been tricked once, and I’ll never be tricked again.”
- On time/energy… what do your 30- and 90-day retention cohorts look like? Are they at the very minimum above 20%? Ideally at 40%?
Because your focus is PMF, your code will be messy. It’s written by either you and your co-founders, young talent, outsourced, or some permutation of the above. To put it bluntly, like Maggie Crowley said in her interview with Nick Caldwell quoting the team at Drift, “It’s a waste of time to architect pre-product-market fit because code dies within two years. If the product is good, it will be rewritten. If not, it will be deleted when you go out of business.”
Speed is the name of the game. How quickly can you test your hypotheses? How quickly can you iterate and implement your customer feedback?
Once you get to PMF, then you can start thinking about robust architectures for longer-term sustainability.
… which leads to my next point.
2. You’re onboarding expensive experienced talent.
While there’s nothing wrong with experience. In fact, it’s a huge boon to your company if you can bring on experienced team members. But if you have to do so at the (immediate) expense of sacrificing 20%+ of your runway, then you may want to rethink if you really need that person now pre-PMF.
Always hire who you need when you need them. There’s no need to spend the big bucks yet when you’re testing PMF. In the early, early days, you don’t need a world-class Head of Ops or a PM, or a firmware engineer with 10 years of experience creating robust architectures. With experience comes their respective priorities and preferences for process – for systemization. When you’re early, yes, you need to create fast, simple systems to test your hypotheses, but you don’t need rigid institutionalization of systems, designed for “industry-standard” scalability. It’s just not a priority. And you don’t need folks who’ve spent their careers living and designing such systems… yet.
Simply put, the downside of experience is often speed – or rather, the lack thereof.
3. Your cultural values lag behind the talent you hire (plan to hire).
I once asked the managing director of a Fortune 500 CVC (corporate venture capital) arm what the differences in hiring practices are between startups and large businesses. He said, “In big companies, hire fast, fire slow. In startups, hire slow, fire fast.”
What did he mean by “hire slow”? Taking time to hire meant hiring intentionally. It’s a no-brainer for most founders. But you can’t hire intentionally if you don’t know who you’re looking for. While both the bigger and smaller players in the business world hire intentionally, the bigger players have long established their cultural mantras where each additional hire won’t change the cultural delta by much. On the other hand, startups only have a handful of team members, and the impact of every team member on the business is greater than elsewhere. That’s true for product, and equally so for the company culture. Each hire will change the culture whether you want them to or not.
So, before you hire any new team members, set the floor, so that each hire won’t set the ceiling. And the best way to do so is to set a differentiated culture. If your cultural values are the same as everyone else, especially the larger technology companies, then you’re not unique. And you won’t get unique candidates. No unique candidates, then you’re not hiring a world-class team. You’re here to not lose, not to win.
Last December, I had a chat with Yin Wu – 3-time YC founder with a prior exit to Microsoft – about the importance of setting the culture at Pulley. She attributed part of Pulley’s massive growth, closing 1000+ companies as customers in less than a year, to their culture. Three of Pulley’s cultural tenets that led them to be the signal amongst the noise are:
| 1. “We are not a family. We are a world class team… Family isn’t someone who always gives you feedback. We’re building a high performance sports team. You either win the championships or you don’t. Or an orchestra. In an orchestra, you either hit the note or you don’t.” |
| 2. The side of the road test: “If your car broke down on the side of the road, would you trust this candidate to come when you need help?” |
| 3. “Move fast and ruthlessly prioritize.” Through an internal system they call planning poker. |
There’s a saying: A-players hire A-players. B-players hire C-players. And A-players cannot work with C-players.
One of the hallmarks of a Grade-A founder is their intentionality behind setting culture.
4. You’re bundling the market before you unbundle the needs.
In other words, you started focusing on the general use case before you mastered a niche. Many founders, especially when pitching to investors, pitch the TAM – the total addressable market. It’s big. It’s growing fast. And the dollar size starts with a B, if not a T. In fact, I dare say, I don’t even care about the TAM. 95 out of every 100 founders I talk to have their startup’s TAM sizes in the billion dollar range, if not in the trillions of dollars. I take it as a given at this point. Yes, there are some exceptions. Those exceptions being that I can see a huge adjacent market they can pivot to in the longer time horizon. What I care more about is the SOM – the serviceable obtainable market. Who knows, maybe the SOM actually extrapolates to a different TAM.
How do you characterize the SOM? The problem you are addressing is a single statement. What is the one thing you are solving that makes your users’ lives easier and/or better? If you can’t succinctly and effectively convey your users’ major pain point, then you can’t effectively convey your value proposition. And without a value prop, you don’t have a business.
Who are the innovators and would-be early adopters in your market? Who has spent time and money in the idea maze? Deep enough to have their own earned secrets?
Your inability to deliver a crisp value prop also means your team won’t be aligned. Your cofounders may see it as X; engineering, Y; marketing, Z. And all along, it was W for you.
The grander vision for the company is nice. That vision gives you a North Star. But if you’re over-indexing on your vision, then you’re not listening to your users. Pre-PMF, your innovators and early adopters of the adoption curve. A proxy of being too vision-centric is if your company mission/motto is:
- Too generic.
- You don’t know how to summarize your product solution without using buzzwords.
In closing
Being a founder means being disciplined. With enough money, enough education, and enough curiosity, anyone can be an innovator. But not everyone can be a professional innovator. In other words, a startup founder. If I were to use an analogy, anyone can play sports, but not everyone can be an Olympian. Being a world-class athlete requires discipline.
So, before you focus on what to do after the Cambrian explosion, focus on getting to the Cambrian explosion first. Focus on catching lightning in a bottle.
Photo by Aaron Burden on Unsplash
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