In the last three weeks, I’ve given three talks to groups of entrepreneurs. It’s really great to get out and meet entrepreneurs at the beginning of their journey and offer (hopefully) helpful advice. I found myself repeating the following advice a lot, so thought I’d share it more broadly here.
The two most important questions to ask as you’re starting a startup are:
- What will the world look like in 3–5 years if your startup is incredibly successful?
- What is the queue of risks that imperil the fulfillment of that vision?
What will the world look like in 3–5 years if your startup is incredibly successful?
The phrasing of the first question is really important. I don’t want to know your revenue projections per se. In most cases, this is impossible to project and all you really know about those numbers is that they are wrong.
The phrase is ‘what will the world look like.’ Great entrepreneurs create the world the way it ought to be. Typically, an entrepreneur’s passion shines through when they answer this question. What broken thing in the world are you fixing? How will your product deliver value to your customers and, ultimately, their organization? If you’re struggling with this question, reflect on the motivation driving you and make sure you have problem/founder fit.
What is the queue of risks that imperil the fulfillment of that vision?
The Lean Startup movement has done a great job of motivating people to get out of the building and talk to customers. For example, it’s made customer feedback techniques such as landing page or wizard of oz experiments almost the default approach to prioritizing the features on a product roadmap. However, your experiments should be prioritized by how valuable it is to get real world data about the hypothesis being tested and how inexpensively you can get it.
One important thing with a queue is how you sort it. In this case, I recommend a sorting function that combines the above inputs (risk & ease of testing). Too many entrepreneurs I meet focus on lower risk hypotheses that are easy to test instead of figuring out how to test the mission-critical ones.
For example, the biggest risk is usually “Does anyone want to buy your product?” Too often, the startup focuses instead on “Can we build the solution?” I always encourage tackling the highest risk hypothesis with the lowest investment of effort. For example, can you sketch out a paper prototype and see if you can get a letter of intent from a prospective customer? Rarely do you get better-validated learning than a few paying customers.
When you sort your queue by risk and ease of testing, you start to think through how many things you can easily validate or invalidate up front before you run out of runway, which helps you think through how it impacts your financing strategy. Specifically, do you validate enough things about your business before running out of money to materially change your startup’s current valuation?
My sense is that most entrepreneurs have some ideas around both of these questions but have spent too little time fleshing out their analysis. Remember — time is the most valuable (and constrained) resource that any of us have. Make sure you’re using yours to work on the big problem (question 1) in an efficient and effective way (question 2).
As you start up your next venture, I encourage you make a big pot of coffee, turn off all of your devices, and spend a few hours in a room with a whiteboard to capture your thinking around these questions. Based on my experience, you’ll appreciate the clarity it brings.