This article is part 2 of a four-part Startups Playbook Series (see part 1 here). Navigating the Startup ecosystem to build a business is a daunting, stressful, costly, and often lonely journey. But the reward for when you make it - priceless. Having the right tools, direction, and support is often the lifeline between success and failure. This series will guide you through 4 business-critical areas you’ll want to nail in order to keep you on the road to success.
Visit us March 23th for the release of part 3 of the Startups Playbook Series - Building the Right Startup Team
Once you have a good grasp over how you’re going to fundraise for your start-up (or actually get funding), it is a critical next step to start executing on building your product. Everyone has ideas, but almost none of these ideas turn into products, and even fewer become successful enterprises. If we think of this as a funnel, it would be a pretty broad one at the top (ideation) and a very narrow one at the bottom (growing venture).
Traditional thinking is that founders should build and launch a small/limited version of the MVP to validate their value proposition, learn from users, and gain traction before raising a pre-seed or seed round. This helps refine the product concept, helps build some customer interest (if not all-out traction), and displays the tenacity of both the idea and founding team to investors – certainly better than having your pitch deck as your only source of traction! Hence the rush to “get building” and push an MVP out the door. As Reid Hoffman, the founder of LinkedIn, says:
“If you are not embarrassed by the first version of your
product, you’ve launched too late.”
However, while this focus on MVP may be an excellent approach for specific product or experience categories, it puts founders in suboptimal positions a lot of the time. So much so that you may see the worst of both worlds – focusing on a live or workable MVP slows down your learning process, and at the same time, results in you building an incomplete product or user experience that is insufficient to acquire, delight, and retain users. Often, the hard work you put in building your full (and yet, incomplete) MVP may keep you away from the all-important smart work of figuring out what you want to build in the first place. Digital or otherwise, product or service, whatever you offer is made up of multiple blocks of multiple elements that make it work. Assemble them, and you have an MVP. Hence, understanding and refining these blocks and elements is a vital first step. Great MVPs are the outcomes of smart work that often doesn’t include writing a line of code.
Think about the experiments you can run that allow you to validate your value proposition, learn from users, and gain traction – all MVP goals – without actually building the product! Indeed that’s sorcery; you must be thinking? Not quite. A couple of fantastic strategies focused on the ‘Understand – Define – Sketch – Decide’ phases that can get you better outcomes than building a traditional MVP are:
User discovery and at scale surveys: These are used to generally understand users and get feedback on high fidelity design prototypes. You can learn an incredible amount about user behavior and needs without ever writing a line of code! Getting these right and into your specs before building your MVP can save much time, hassle, and money. The surveys can also be an excellent source for identifying your early customers. Forums like BetaList or Product Hunt 4.0 are also a great place for discovery.
Painted-door customer acquisition tests: A painted-door test, also called a fake-door test, is a way to get your early testing done quickly and cheaply. The name borrows from architecture and design where painted (fake) doors are added to a building to add a design element or achieve balance/symmetry on a plain wall. Driving users to a full promotional landing page that describes the product tests how much you can get users to commit. Maybe it’s joining a waitlist list, or even better, trying to take an essential user action, like creating an account, providing critical information or data, or sharing a link with a friend. The more commitment from the user, the better, even if there ultimately isn’t a product experience in it for them. User engagement can be an indication of things you need to add or drop in your MVP.
The duck on the water: In this approach, you create the appearance of a functioning product (much more accessible today than ever with no/low code) but have humans managing all the backend implementation. It looks like the software, but it’s a user interface with humans doing all the work. A real-life example best explains this:
An extreme example of frugal validation before MVP is Zappos, the American online shoe and clothing retailer founded in 1999 by Nick Swinmurn and sold to Amazon in 2009 for $1.2 billion. Nick would visit shoe stores, take permission to click pictures and upload them on a rudimentary website (Shoesite.com) and await orders. He would run down to the shoe store when an order came in, buy the ordered item, and then ship it out to the customer. Objective: Nick put up the website to validate that people would buy shoes online (remember, this was 1999!). Manual? Yes. Inelegant? Certainly. But it served the purpose of proof of concept/prototype/validation. After many customers started placing orders, Nick invested in and developed the technology and signed up with three major shoe brands for a ‘drop ship’ arrangement. And thus, with the humblest of beginnings, was born a new eCom unicorn.
Because you aren’t building a product with these strategies, you can run multiple iterative experiments, learning and refining your product strategy as you go along for pennies on the dollar. Instead of a single, grand MVP launch, you potentially get more experiments and resultantly more inputs with the ability to double down on what works better with potential users. Social media, crowdfunding, crowdsourcing, community support, etc., there is much available for you to do more with less. Once you know what works, you are in a great position to raise capital and build and launch a V1 product informed by rigorous experimentation and capable of garnering, delighting, and retaining users and turning them into your sales force.
Always ask yourself, what are you trying to learn and validate, and whether building an MVP on day one is the right approach as all startups aspire to. You are a startup founder, after all – be original.
About Juan and Alec:
This article is co-authored by Juan Scarlett and Alec Wright, Founders and Managing Directors of OneValley Ventures. Juan leads the investment strategy and execution for the OneValley Fund and growth-stage investments with OneValley partners; while Alec focuses on pre-seed and seed investments in the enterprise software, big data, digital health and education and learning technology markets. They have both served on the boards of several companies and have 20+ years of experience in technology investing and research.