Failure is the best teacher, but. . .
it's a painful lesson. Avoid the ouch by learning from others’ mistakes. Failory interviewed 80+ startups to analyze their failures. Here’s our riff on this analysis, with quick-hit advice. Most common reason for startup failure: Lack of product-market fit Takeaway: Validate that the market needs what you’re offering—before investing extensive resources. Advice: Market research is the first step but doesn’t validate product-market fit. We’ve talked before (newsletter 1) about how to interview target customers to understand their problem. Next, develop a hypothesis and test it. The idea is to spend minimum resources to extract maximum learning. Minimal-resource test ideas:
Prototype
Design mocks
Landing page/ Fake Door
AdWords campaign
Audience building (through a newsletter, Slack, or your own community)
Video
The learnings inform your MVP – minimum viable product. Lean Startup expert Ash Maurya describes the stages:
Prototype –customer discovery
MVP –customer validation
P/M fit – customer creation
Growth/scaling – building your business
You achieve product/market fit when people are buying your product/service – many people use it, and they pay! 🤯 Most common fatal competitor: Not an actual competitor, but the current solution (i.e., how customers solve the problem without your product/service). Takeaway: If your startup doesn’t add enough value, people will simply stick to what they’re currently doing. Advice: When you ask target customers about their problem, ask what they do about it. If they don’t do anything about it and haven’t spent money to try to solve it. . . identify a more urgent problem. Customer acquisition is expensive. Even when you’re just testing a hypothesis, your value prop has to be compelling enough to get people to subscribe, sign up, give you their email address… or pay. 🔀Another common marketing failure, not limited to startups: Lack of focus Takeaway: Startups are more likely to succeed by solving a well-defined problem really well, for a single, well-defined market. Advice: Develop a North Star metric. Each team should have their own KPIs that contribute to the North Star. Metrics drive behavior – so think carefully about what incentives that metric implies (and how the metric could be gamed). Use a metric that measures how you deliver value to the customer, not how you achieve revenue. Revenue can be gamed; value cannot. Most important lesson learned the hard way: Lean Startup Takeaway: Startups are risky; the Lean Startup reduces risk. Think of it as the Scientific Method applied to business. Advice: When adding to the team, look for people who understand Lean Startup - preferably operators who have grappled with uncertainty and figured it out. Success at big companies does not necessarily translate to success at startups. Ask them about both their successes and failures and what they learned. Elon Musk offered the following insight on hiring: “What I’m really looking for is evidence of exceptional ability. Did they face really difficult problems and overcome them? And of course you want to make sure if there was some significant accomplishment, were they really responsible or was someone else more responsible. Usually, someone who really had to struggle with a problem, they really understand it and they don’t forget.”
Cool Stuff
Word of mouth is critical, but how do you measure it, and therefore increase it? Learn about the Word of Mouth Coefficient. Working with influencers? Here are tips to maximize ROI. Have you found yourself managing online learning? (Solidarity!) Khan Academy's Sal Khan shares advice: Do less, and turn off the camera.
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