One of my favorite things about founders is that they are practically required to blithely ignore statistics: barely 80% of startups make it to a Series B. They must convince investors, recruit and galvanize a team and charge towards launch, all while acting as if the “startup death curve” does not exist, or at least does not apply to them.
At West we help alter these statistics by unlocking the market side of product-market fit.
In the early stages, the search for product-market fit is high pressure and precarious. It’s done in the context of investor scrutiny, fluctuating team motivation and a burn rate. Under pressure, many entrepreneurs instinctually double down on engineering and push like crazy on product.
And that instinct makes sense. Product is the part of the equation they can influence directly—it’s under their roof. A more ambiguous and ambitious endeavor is to lean towards and listen to market.
The shift from product to market is a shift from a supply-orientation to a demand-orientation and from profit to value. This requires a massive shift in perspective for many of the startups we encounter. How do you instigate that?
When working with a new portfolio company, we begin by gathering the leadership team to answer a set of simple questions:
- WHAT does your business do?
- WHO does your business service?
- WHY do you exist?
These questions, which begin to constitute a communication platform, are deceptively simple for several reasons.
- First, every member of a team usually answers them differently, uncovering a lack of fundamental alignment. This result is practically universal.
- Secondly, the answers we get are often conflated with one another. When asked WHY they exist, they answer with WHAT their product does (a value proposition); when asked WHAT their product does, they explain what it does for them and their investors (a profit proposition).
So shifting focus to market is a hairy process but extremely rewarding once we untangle things.
After years of practice, we’ve developed a couple of tricks for bringing teams through the process. We usually spend a few dedicated days collaborating with a team to reach a platform that feels right, which includes some homework from the team and relentless preparation on the part of the West team.
So when the Endeavor Investor Network presented us with the opportunity to run this exercise with more than 35 entrepreneurs representing 15 countries across EMEA, all in the same room, in under 90 minutes, we approached it as an experiment.
Here are some of the things we learned:
- Start with what you’re not. When tackling open-ended questions, sometimes it’s easier to define what you are based on what you’re not. Referencing a range of startups at various stages and across industries helped participants circle closer to their true north.
- Differentiated & Specific. Startups can easily turn into echo chambers.
Doing this exercise internally might yield a platform that feels right, but it’s hard to know whether it’s truly unique until it’s shared externally, either through conversations and prototypes (cheaper) or via launch in-market (expensive). Having a range of companies in the room and sharing ideas with the larger group forced entrepreneurs to consider their uniqueness. If a ride-sharing company from North Africa has the same value proposition as a weather-tracking platform from Dubai, the value proposition is probably too general.
- Healthy Competition. This work requires a major shift in perspective. And it represents a real challenge for deeply product-oriented companies. But working in mixed teams allowed the entrepreneurs to challenge each other on whether they were truly adopting a demand-orientation.
Regarding competition, the context of the workshop within the day’s agenda is important. Directly after the Endeavor workshop, the entrepreneurs had a full day of investor speed dating with West and 25 other investors in the Endeavor Investor Network. It begged the question, does all this market-orientation work matter to investors?
The answer should not surprise you, but it bares explaining.
- WHAT: The clearer a value proposition is to investors, the clearer it will be for the market. But content matters. This is not an exercise in wordsmithing or crafting an elevator pitch. This is about clear and undeniable delivery of value to buyers.
- WHO: Potential investors like a big TAM. Investors and board members need confidence that you can capture more than that first ring of likely fans or early adopters.
- WHY: A purpose demonstrates to investors that a venture can be bigger than a single product at a single moment in time. Good investors invest in people; they care about founders’ motives.
In addition to relevance to investors, a communication platform is a keystone for employees to make decisions against and rally around. And it’s developed with market in mind. So it’s in service of capital, team and market—the most critical factors in reaching the escape velocity required to beat the odds.
A bulletproof communication platform requires testing, iteration and socialization, plus creativity. It doesn’t happen in 90 minutes. But with a solid draft in their back pockets, we think founders have the footing to be “responsibly ignorant” of the death curve as they charge ahead.
Allison Light is Strategy Director at West. Get in touch at firstname.lastname@example.org
Cover image design: Jacqueline Lau/West