The Most Underrated Phrase in All of Startups
Meet Weston Bergmann, the founder and lead investor of BetaBlox. BetaBlox has acquired 5 percent of roughly 60 startups in the last two years alone. Weston is also an active angel investor and loves connecting growth capital to entrepreneurs in various startup communities across the United States.
BetaBlox coaches a lot of stuff that can be considered “trendy,” not because they’re trendy in that kind of flash and dash way, but because they are important.
Growth hacking, lean startups, responsive design, pivoting, A/B testing and other “trendy phrases” are incredibly important aspects to an early stage venture’s life. We are the first to admit these things are important, but we also coach our entrepreneurs not to say these words outside of our incubator. They tend to get thrown around so much that they are cheapened. Eric Reis even cites the overusage of his own book’s wording as “lean washing.”
But this doesn’t change the fact that these things have become trendy because of their importance.
Despite the crazy amount of usage that some of these trendy phrases get, there is one phrase in particular that I believe is underutilized. It’s a phrase that represents the most critical moment in an early stage venture’s life: product/market fit.
When you first start a company, chances are customers don’t know who you are or what you are selling. In some cases, they may not have even heard of your industry. This is why startups must jam their products down the market’s throat in an attempt to get feedback on what the entrepreneur is doing right and where they can improve.
A slightly less crude and business school term for this is “push strategy.” You are “pushing” stuff at your market. This pushing obviously isn’t smooth. Your funnel metrics are performing piss-poor at best, your good feedback is mostly coming from your family and it’s because they feel bad, and most importantly, you’re not making any money.
You combat this phase with as many extremely small improvements as possible, as fast as possible. These aren’t meant to be huge features that change the all-encompassing offering, but instead tiny lacerations.
Things like changing the copy on your website, improving shopping cart loading time, implementing a non-reciprocal link building campaign, etc.
Time, hard work, persistence and patience will eventually build up enough lacerations in the value for which your startup provides, and the market will no longer need to be borderline tricked, forced, bribed or given freebies to try your product. It will go from a push strategy, to a pull as the market starts to “pull” the product from your arms. It’s the time where your salesmen are saying “the product sells itself”—and they’re not exaggerating.
This incredibly important time is called product/market fit. It’s the window of time between just starting to figure things out and radical growth. It’s the time in which the product is finally matching the needs of its market with the offering.
Graphically represented, it’s the inflection point in your growth curve that marks the beginning of a hockey stick.
Why Is Product/Market Fit Important?
- A startup is not a business. A startup is nothing more than a series of educated guesses, assumptions and leaps of faith. Who you sell to, for how much, how you get it to them and a million other variables are rarely correct in the first go around.
It’s up to entrepreneurs to realize that they are not implementing a strategy, but instead searching for a provably sustainable one. This forever needs to be your mindset until you hit the fit. If it’s not, you’re doomed to fail.
- Investors don’t want to pay you to search for a business model that might not exist, or that you might not be able to find. They want to pay to extrapolate your findings to a substantially larger audience. In other words, they want to pay for you to scale your company.
This turns into a little bit of a Catch 22: investors don’t care until they’re no longer needed. Needed is different than wanted, though, and while you may not need them, their support will surely speed the process to mass adoption.
When I say “extrapolate,” I’m referring to taking the newly proven business model and finding a way to sell it to more people. The best example is how Mark Zuckerberg could take proven data (people finding value in Facebook and proven ways to get more people onto Facebook) and extrapolate that to hundreds more colleges across the United States. He could say to investors: “We get X number of hits per day at Harvard, so 100 more schools would be 100X hits which would turn into Y number of ad dollars.”
Investors invest in these types of stories.
So go out and attack your to-do list. Grow the backlog of value that you can provide to your customers. Test your hypotheses. Prove your model and show it off to next-stage advisors with data. Find the product/market fit that your startup needs to grow and the spoils will be sure to follow.