Most startups fail, and there are many reasons for that. The biggest one is due to failing on product / market fit (PMF). The current trend in entrepreneurship is to raise enough money to build out an MVP, and then work towards PMF. This is a trap that even I’ve fallen into. Even two years ago I went from having an idea one night, and two weeks later I was entering into due diligence on a 1.1million dollar raise – I was doing entrepreneurship right, I thought.
Since then, I’ve been working with my co-founder of DecisionTree.io, Dr. Alan Cornford, on doing a deep dive into the science of minimizing entrepreneurial failure, while bootstrapping. What we’ve discovered is that instead of validating an idea hypothesis as most documentation suggests, instead we spend the initial heavy lifting on problem finding.
Over the last 5 years, we’ve helped dozens of entrepreneurs through my private founders coffee group. Most entrepreneurs flail around, working on building the fun parts they want to build, and are not laser focused on a paying customer’s pain point. During this time we’ve also noticed countless incubators and accelerators, whose only metric is usually how much money they’ve allegedly helped a company raise – which we feel is a terrible metric – our founders coffee members have collectively raised millions of dollars over the last few years, but we don’t value that like we do the magic of finding a market of paying customers. Raising financing does not signify you’ve found a market fit, it usually just accelerates the burning of money faster. The real unsung heros of entrepreneurship are the bootstrapped.
As my friend Alex Cruise said,
“There are problem finders, solution providers, and executors”.
Most entrepreneurs are good at solution providing, which is the easy part of these three roles – what we’ve been focusing on is the optimization of problem finding.
We’ve been testing this with founders coffee, friends, and family, and we’re now ready to taking on fellow entrepreneurs to join us.
The benefit of staying focused on problem finding, is this can be done even before ideation, it’s for everyone – whether you’re a wannapreneur who doesn’t even have an idea yet, to a serial entrepreneur making money already.
Where do you start? It’s all about the market research – you want to find a group of people with money, and then find out what their pain point or unmet need is. How you discover this is part of the art & science of problem finding, but what is for sure is you don’t want to convince them your idea is great. Successful entrepreneurs are great at leading questions, and then mostly listening. Serial investors will often agree with strangers pitching them, just to exit the conversation. What you want is to have people explain their problems, and trust that you have the ability to solve it.
Once you’ve heard a significant problem, you want to dive deeper and understand the job to be done, most famously explained by Clayton Christensen who explains how even milkshakes have a job to be done. Once you think you have identified a pain point or unmet need and someone provably willing to pay for you to solve it, you should explore others like that (potential) customer to identify if this is a market need, or an individual or small group need.
For example, many affluent environmentalists may say they would pay for an electric car – but upon further inspection you would realize that some are OK with a Prius or Bolt, where others, a way larger market, want a Tesla. Knowing what separates these two types of customers shows the importance of knowing the specific pain point(s). Through our problem finding case study, we discovered this difference and it’s quite the aha moment if/when you discover it.
It’s important to know that you should always be doing this market research, even with your long-term existing customers if you have them, as pain points and unmet needs are always evolving, and 2020 is a glowing example – your customers needs in 2019 are likely vastly different in 2020 – do you know what they currently are?
If you’re interested in a problem finding journey, with the goal of minimizing your odds of failure and racing to bootstrapped success, what we identify as true entrepreneurial success – join us.