For a little more than a year, I dedicated myself to building and shipping products. This is the story of how I made trivial and less trivial mistakes, built products and generated revenue, got cold outreached by a partner from a top european VC and witnessed the death of a bunch of my products.
In 2021, freshly enrolled at the prestigious HEC Paris, I wanted to realize my dream of launching a successful startup. I was surrounded by ambitious folks who gauged the quality of an entrepreneur by the amount he raised for his startup. A few months later, I had a startup idea and I thought it was brilliant. Without really knowing why, and probably by mimetism, I thought I had to create a pitch deck, find great advisors, pitch to VCs and BAs, and that somehow something would happen.
What’s dangerous about this approach is that something actually happens. It takes you somewhere and somewhere is probably better than nowhere right ? You network, you call interesting people and they say they’re going to help. You can even raise funds by pitching a convincing idea on a hot trend ! Unfortunately, this is only the illusion of progress. Solving a problem and building something people want is the sole purpose of startups. And it’s INSANELY hard to get this right. Because they have no idea how to do the latter, many founders stick to something much easier: building a company. This is a fatal mistake.
An idea is just the beginning of the ideation process. It’s an intuition that might (or might not oftentimes) put you on the path of discovering a gap in the market. A great startup idea is discovered, not invented. It’s a gap in the market that several people in the world see and race to fill (this is why having competitors is a good sign for an early-stage startup). And it’s insanely hard to find and fill one of these gaps. Talking to potential users is far more valuable than pitching your startup, whatever that may mean... Building a startup is an experimental science and customer interviews, sales and business metrics are your observations and measurements that allow you to make credible hypotheses on the existence of a gap in a market and how you’re going to fill it. This should be your obsession, not building the perfect deck or networking with the right people.
After a couple of weeks, I understood that this was not the right way of doing things. I became obsessed with talking to potential customers and making something people want.
So I should start with a problem right ? Well, I found one ! Web3 projects, especially NFT projects, tell me they struggle to make informed decisions about their business. They lack the right tools to help them analyze their data. There’s no Google Analytics for Web3.
So I spoke to A LOT of them. I even helped a bunch of them for free and found specific examples of non-data-driven decisions that made them lose money. My obsession with users eventually paid out, I got my first users, and then my first paying customers. It felt amazing to finally make a product people were willing to pay for ($300/month). We were 3 friends, each one of us in his dorm room, and we spent weeks tirelessly building and talking to users. We found ourselves in calls with big companies such as Ubisoft, Decathlon, or GAP, we spoke to founders who raised tens of millions from all around the world and with top European VCs, all of that in the comfort of our rooms.
But something was off. A lot of our potential clients progressively didn’t need us because there was no data to analyze, no data driven decisions to make. The market was dying and our potential clients were dying with it. Some of our clients even went bankrupt. And when you’re fighting for survival, you don’t need a data analytics tool.
Peter Thiel famously said that you should aim for dominance in your market. And you can’t do that in a big established market. So you should choose a small but growing market or pick a big market with an underserved niche that will grow in the future (this is why there are so many CRM startups that are doing just fine). In both cases, it is crucial to understand that the success of your startup doesn’t solely rely on your execution and goodwill but also on the core hypotheses of your market. Is this market or niche really going to be big ? If not, solving a problem, even an important one, in a small or dying market won’t bring you anywhere.
But how do you know if a market is going to be big ? There’s no exact science on the matter, but there are a few classic indicators that can drive the growth of a niche:
I can go on and talk about the importance of thinking about pricing when choosing your market (i.e.: If you’re selling coke, you need 1 000 000 customers to make $1M. If you’re selling high-end enterprise software, you might only need 10 customers to make $1M) and other factors to consider but I think you get it by now. Choosing the right market is insanely important. So choose wisely.
At this time, I was working with a friend (also an engineer). We learned from our previous mistakes and we did plenty of customer interviews in promising markets. We found gaps in some niches and we began building products for our potential customers to test.
It was promising and we quickly got on our feet again. But we had very few beta testers and we struggled to find enough people to test our products. So doubts intensified. Maybe we didn’t find a proper gap in the market yet? We pivoted, again and again, talked to a bunch of potential users and built new MVPs. At a certain point, we got tired of the mild interest our potential clients had. Maybe we failed to find an urgent problem to solve for them ? And according to common startup wisdom, your idea is not worth pursuing if it doesn’t solve an urgent problem.
What I failed to realize at the time was the massive scope of people I needed to reach in order to actually gauge the urgency of a problem and decide if there’s an opportunity. I reached out to a few hundreds of people on Linkedin, barely followed up, got in a few dozens of calls and decided that the problem I was solving was not urgent enough. This is a common mistake made by startup founders, and I was guilty of it.
Let’s say there are 100 people in your market. You’re trying to solve a problem that 70 of them have. Among these 70, only 10 consider this problem to be urgent. Among these 10, only 3 would trust an early-stage startup to solve their problem. Finally, among these 3, only 1 will actually get on a call with you. What I’m trying to say, and what people who did sales in a startup already know, is that you need about 800 targeted and personalized cold emails to close 1 client, and that you need to follow up 3 to 5 times. And this is just for one distribution channel (cold emailing) that works for certain B2B ideas. As a startup founder, especially if you’re not technical, you should be an expert in distribution channels. Do people who have the problem you’re solving know about you ?
You might get it right and have a promising product in a great market, but if people who actually deal with the problem you’re solving don’t know about you, you’re going nowhere.
If you don’t trust me on this one, maybe David Sacks (former COO of Paypal), will do a better job illustrating it. To him, what explains the success of Paypal and the Paypal mafia (Elon Musk, Reid Hoffman, Peter Thiel, etc,…) is that “Paypal innovated not just on product, but on distribution as well”:
Q: What factors explain the PayPal Mafia?— Mike McGuiness (@mikemcg0) August 5, 2023
The employees of PayPal went on to build many of the companies that defined Silicon Valley in the 2000s, such as Tesla, SpaceX, LinkedIn, YouTube, Palantir, Yelp, Yammer, and more.
In the clip below, David Sacks—founding COO and product… pic.twitter.com/f1RAcxdjtS
If you've made it this far, just know that we've had our share of wins too.
We built great products, learned about sales and design, and developed an acute product sense to the point we began predicting the next features of big tech products like Intercom or Notion.
In short, we learned what a bunch of college kids would learn if they put their heart and a whole year into building, shipping and selling products ;)