Products Are Tactics
I care less about product everyday. I care more about people and markets everyday.
With seed stage companies, most everything is mutable. The founders are forever The Founders but the team will grow. The product will morph. And the name will probably change too. That this all happens is a good thing. It should be encouraged amongst both founders and company advisors. The best seed stage companies are creatures of learning. I’ve written about this before in a post on pivoting.
At First Round Capital, this is something we talk about a great deal. Every year, we review more than 2500 plans and presentations on ideas for new businesses. We typically invest in 20 new companies every year, but we continue to follow the development of many companies that we have chosen not to fund. While doing so is often humbling, this has allowed us to develop a tremendous amount of institutional knowledge on business building.
We recently carved out some time to review and discuss some of the data we have collected. This involved checking our old notes from company meetings and revisiting their original pitch decks. It’s a staggering exercise actually. Seed stage companies become successful through paths that nobody can imagine. Many of the companies which grew to be most successful, identified their initial market correctly but missed on the specifics. Often, they knew to target a certain type of user or community, but were off in identifying the growth engine of their business.
The currency of an early stage business isn’t revenue or profit, it’s learning. Products and features are tactics employed to test and reach a market vision. After our data review, I’m more convinced of this than ever. When product roadmaps are spec’d and fundraising is planned, they need to be done so with the intent of discovering what is and what is not working in a business. Every feature / pixel / byte is a chance to take another step to a market vision. When they don’t another tactic is needed.
The best entrepreneurs know this. I’ve seen the data.
Read This Week
Articles I enjoyed this past week and why. In brief.
- Seed Magazine Findings Log: Fascinating briefs on general science topics. My favorites including an overview on how Earth’s magnetic field was crucial to enabling life; in great news for doctors, patients and gamers, brain-computer-interfaces (BCI) become easier to implement; weed killer and hermaphroditic frogs
- Pinpointing Disease with Genomes: NY Times article covering what scientists are learning from full gene sequences. A surprise finding: common diseases can now be linked to uncommon genetic mutations. There’s still so much to be learned here. As the price of a full-genome sequence falls from $500 million to $25k to sub-$5k in just a few more years a mind boggling amount of data is going to be collected and analyzed. Excited to have a front row seat to this as part of First Round’s investment in DNAnexus.
- The FCC Plan (and Stimulus): Earlier this year, my friends at GigaOm invited me to join them for a roundtable discussion with FCC Chair Julius Genachowski. After the session, I tweeted “Broadcast TV spectrum is wasted on broadcast TV. Let’s allocate it to wireless carriers instead.” I’m heartened to read that I wasn’t the only one thinking this way and it may very well be part of his proposal.
This Just Ain’t Gonna Work Out
It’s easy to adapt to challenges you face many times. It’s difficult to be good at the things you rarely confront. Knowing how to adapt to seldom seen circumstances is the key to driving a start-up forward.
This past January, we held our annual First Round Capital CEO Summit to bring together our portfolio company CEOs and founders for a day. Our goal is to keep the day focused on topics that the CEOs can use in the daily operations of their businesses. We’ve been luck enough to have some great speakers join us, but the meat of the day is in the breakout discussions. This year, I facilitated a discussion on “Knowing When to Pivot.” Pivoting is one of the most critical challenges a business can face. It’s also one of the most rare – not many folks have a great deal of practice in this arena – so I wanted to share some of the key takeaways from the discussion here.
So what is a pivot? It’s what you do when you’ve built everything according to plan and yet, the business and users aren’t materializing according to plan. For the record, I’m a huge believer in all aspects (engineering, customer & business) of agile development. No need to debate that here. Sometimes, however, it takes awhile to see that it just ain’t gonna work out. PayPal as we know it was built after a legendary pivot. And in our own portfolio, Like.com, took shape after originating as a very different business. Here’s what you need to know about pivots and why you shouldn’t be afraid of making them: Read the rest of this entry »
