This is adapted from a talk I gave at Grace Hopper Celebration 2020 on Evaluating Startup Ideas. This will be the last article associated with this talk. Previous articles can be found here and here.
Problems, problems, problems have plagued 2020 and this newsletter. Time to finally talk about solutions. Once you’ve identified the problem, finding the solution is pretty easy, all you need to do is “make something”, right?
“Make something” (Finding the Solution)
The fun part is that founders own the “solution”. Founders are builders, creative, and curious. This enables them to not only imagine a future, but also build it.
Founders can make anything, just make sure it’s something people want.
There are three criteria that a solution needs to make sure it is something people want:
People spend either time or money on your solution
“A lot” of people spend time or money on your solution
People are spending time and money on your solution at a fast pace
⏰ So, what DO People Want? 💰
Before embarking on a solution, defining the solution’s success metric is important and often skipped. People assume if the solution fixes the problem that alone is success. This is not true of the startup world. For the vast majority of startups, success of a solution will be determined by whether enough people want their solution. [a]
Measuring what people want is evidenced by two things: Time and Money.
A person’s calendar and wallet will tell you what they want. For a founder (and investor), if a person spends time or money on your product, you can assume that the product is something that they want.
Therefore, how much people want your solution is measured by how much time or money spent on your product. If people are spending a lot of time on your startup’s product, you will need to find a way to convert time into money. [b]
Money can be converted into time, but time cannot be easily converted into money .
Any company will ultimately be measured on their revenue performance, so the sooner the startup can figure out how the company will make money the faster path you have for sustainability.
⁉️ How much is “a lot”?
When talking about tech startups, how much is “a lot”? When investors are looking to invest in your startup, they are wondering if this startup can make $100MM in annual revenue within 5-7 years. [c] For a B2B company if you can convince 100 customers to pay $1M annually within 5-7 years you are on your way to enough customers. For a B2C company if you can convince 1M customers to pay $100 dollars annually then that is enough. This is incredibly simplistic, but a good starting point to help you as a founder think if enough people will want your solution.
📈 How much do users want it? (Growth Rate)
The other dimension is how intense the desire grows over a short period of time. The quicker the growth the higher chance the startup creates momentum. Startups thrive on momentum, if your product takes too long to grow, competitors have an easier time to become the leader or you may not have enough users. In fact, startups are by definition meant to grow quickly. [d]
Momentum is best created over shorter periods of time.
Momentum is measured by your growth rate over a period of time. The pace of growth is an indication of how badly people want your solution. This can signal if the need is acute.
Rule of thumb in terms of weekly growth rate are the following [d]:
Exceptional: 10%
Great: 7%
Good: 5%
If you grew at a 7% week over week, this is what you would end up as the following":
The earliest growth seems the smallest but it compounds over time to exponential numbers. Not only does the graph above show this, but sadly the state of the COVID cases show this nationwide.
🧠 Mindset
As you build your solution, the most important influence is your mindset. Your mindset will enable you to endure (what I hope) the many years ahead as you build a successful company. Set your mind on these things: (1) You are not the user. This helps you listen more and focus on the problem you are solving [e] (2) Approach your solutions as a series of experiments. This helps you try a lot of things. (3) Refine your hypothesis. This helps you to learn faster. and (4) Bias towards action, just launch!
📢 Announcements📢
Mental Health and Love
High potential funded startup in the mental health space is looking for a founding CTO. My friends at Flourish Tech are building something the world needs right now - empathy coaching. I’ve taken the course and it has helped me immensely with the loved ones I am around (all the time during the pandemic)! If you are interested in learning more about the company or role, feel free to send Paul a note paul@flourishtech.us [f]
YC interviews
The season still continues! For those that have an upcoming interview, I’m happy to do a mock YC interview with you,just sign up. Priority given to women and underrepresented founders.
🔦 Startup Spotlight 🔦
For some people the pandemic has been a perfect time to Make Something. If you have young ones at home and looking for something for them to do, you can have them re-build your doorbell or turn the lights on/off from the phone with Thimble. Thimble is a monthly subscription that teaches kids (ages 10-19) robotics, coding, and engineering skills through a progression of 15 kits paired with live and on-demand classes. I just signed up, and the founder has offered a special discount 15% to the readers here, just use the code FOUNDERMUSINGS at checkout.
They went full time in March, within 4 months grew to $65K MRR (Monthly Recurring Revenue), and growing 39% monthly. If you are interested in connecting with the founder, drop him a line at oscar@thimble.io to learn more!
🦃 For those that celebrate Thanksgiving, may it be a week of gratitude, grace and forgiveness during this time. I’m grateful and inspired by all of you to keep building and investing in the future.
❤️Sharing is caring. If you think anyone could benefit from this newsletter or post, please share! ❤️
i love how simple the points are.
also, #3... i think you meant "on" not "one".
I really enjoy following your newsletter, thanks for sharing these insights! would you please tell me which resources may help me to learn more about KPIs? I have a b2b startup in the HR domain.