Lessons learned: My two cents for startup entrepreneurs in the midst of the ideation stage
Let me start with a simple definition of a not-so-simple process: Ideation, as far as startups are concerned, is a synthetic process of identifying big problems that are ripe for disruption. Ideation is usually separate from the go-to-market strategy. We decided to integrate the two elements in our process since we wanted to make sure the direction we chose would be scalable when it comes to GTM.
Both my partner Eran and I are not new around the startup block. We were actually introduced by an amazing investor (and friend) who’d participated in funding rounds at both of our (respective) past companies. Liad Rubin, on top of being part of connecting Eran and me, was running a team of founders with whom we brainstormed a lot.
Eran co-founded Adience, a startup that was acquired by MarkeTech. My golden ticket was through Kaltura’s acquisition of Tvinci, the startup I co-founded.
Although we founded companies in different industries, we both had similar experiences as founders. When we were in the ‘early-stage’ we felt as though it was us and our partners against the world. There was no one to show us the ropes and teach us the right way to go about ideation.
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I’ve learned some good practices that make this process more efficient and increase the chance of reaching a successful result.
Finding a good direction for your startup should start with considering a variety of ideas.
Naturally, many of these will be related to your (or your partner’s) past experience. In our case, initially, we both wanted something different from our previous startups… to our surprise, we ended up with quite the contrary :) We are currently working on something that we have vast experience in.
We made quite a few painful mistakes along the way, but we also learned some interesting lessons. We’re co-writing this post in order to share some nuggets with the community so that tomorrow’s entrepreneurs can use our past experience and improve their starting point. While these lessons may apply to consumer ventures, we wrote them with a SaaS, B2B business model in mind.
Enough beating around the bush. Here are our lessons learned on how to go about ideation:
Do you have the right partner?
Perhaps the most important decision that will determine your startup’s life or death is choosing the right partner or partners. This is even (way) more important than the initial idea behind your product.
Don’t compromise on finding the right partner, no matter how long it takes. Otherwise, it will come back to bite you.
Look for a partner who complements your skillset and your personal faults (we all have them). For instance, my background is in business, while Eran has outstanding technical skills. Make sure that you share the same core values around work-life balance, the type of product you want to invest in, how to manage the team, and so forth. Align expectations CLEARLY concerning the above, as well as your exit horizon. This will ensure that you’re on the same page. Don’t hesitate to openly discuss the bits and bytes, from professional to general beliefs. You will never agree on everything, but you don’t want to strongly disagree on critical issues.
Take your time getting to know each other before committing and diving into tiring processes. Meet for a drink (go away, COVID19!!!) and insist on both of you being present when meeting with investors, customers and advisors, so that you both get a feel for how you work and think together, with or without stressful third-party interference.
Put real business tasks into play, to see how you can work together. Something with a goal, a beginning, and an end. In fact, I would go as far as saying — create intentional conflicts to see how you and your partner deal with the resolution, and whether you can truly disagree and commit.
What’s the ideal number of co-founders? There’s no right answer. I never considered doing it on my own — it was simply too hard and lonely to consider (plus, success rates are less optimal for single founders). I wanted at least one partner and was open to the idea of more. In my opinion, each partner must bring a unique and critical skill set to the table.
If you’re unsure from the outset what specific product your startup will initially develop, perhaps it’s better to start out with just one partner (so you’ll have the technical and the business areas covered). That way, you can add the industry-expert partner later on, when you have better visibility into your shortfalls as a founding team.
Time for validation
Once you’ve got the initial idea, you should look for validation from industry professionals (the more, the merrier).
Get out there and rub shoulders with anyone who may belong to your future target audience (or alternatively knows your audience well) and can share relevant insights. Specifically, ask about their day to day, things they see others doing and want to do as well, pain points, changes in the industry that could affect them…
Feedback can be positive or negative — your priority should be to first verify how authentic it is, and then check whether it comes from a relevant persona.
Take positive feedback with a grain of salt; a lot of the time they’re just being polite. You’ll recognize authentic positive feedback when it’s accompanied by introductions and connections to potential design partners, advisors, partners, and investors. No one would waste her colleagues’ time if she didn’t truly believe in your pitch.
I tend to dig for gold from listed (public) companies’ financial statements. Yes, I know, it’s not a common tactic but it’s a great source of knowledge: during investor days and quarterly briefings (common events in public companies), they share trends and underlying market numbers that can help validate your idea.
It is important to leverage the resources of investors.
These investors are eager to be in touch with you, so utilize them to your benefit by working with them.
Introducing founder-market-fit — aka, “Why us?”
Always keep your founder-market-fit in mind. This concept examines the founders’ compatibility with the market they’re targeting. Founders should feel that there’s a fit between the type of technology they are experienced with, the product they are about to launch, and their target market.
From a business perspective, make sure that this is actually how you want to spend your next few years. You should be confident that your combined skillset gives you an advantage in your market. Eran, for instance, amazes me on a daily basis with his knowledge of the technicals of marketing tech, predictive modeling, user-level data, and the role of AI. Moreover, him being THE expert in every sales call really helps to build trust super fast.
Need ≠ Demand
During the validation phase, you should have gained a clear understanding of the need for your future product. Just keep in mind that there’s a big difference between need and demand. A need doesn’t necessarily represent a priority with a budget, but demand does. You’ll instantly recognize demand when you see it.
How? If there’s a real demand for your product, you’ll have design partners lining up to work with you as soon as you pitch your idea. I know that today. Potential clients will commit to paying for your product as soon as it’s ready.
Why now?
That is a question you should keep asking yourself again and again. For every single idea we gave serious consideration to along the way, we made sure we had a solid answer to that question — Why now?
The ‘why now’ question applies to both the problem and the solution. Keeping abreast of macro and micro trends will be of tremendous help and allow you to solve problems in a way that others have not been able to so far. If your answer to the Why Now question is sound, it’s like riding a massive wave. A wave can help you build your business faster than you’ve ever imagined.
The product is the core
No-code approach — If your target personas aren’t developers, make sure that they are able to use your product with minimum to zero involvement from their R&D. The no-code approach was particularly useful to us, so we always aimed to create a plug and play solution. Client R&D resources for implementation and maintenance can be hard to come by, and our goal was to remove the barriers as much as we could. Ticking the box on the R&D front was one of the barriers we wanted to overcome quickly.
No major customization needed — Ensure you can implement your solution with minimum professional services on your end. You want to scale fast, so make sure you don’t need to build a massive professional services organization to do that. This will also help you maintain high gross margins.
Actionable solution — Directly influencing an outcome is of paramount importance — something tangible, measurable, and attributed to you. Build your product so that it’s simple to measure its impact on ROI.
Easy buy-in — Try to find out if your budget will be part of an existing P&L line or a new line. There are three different use cases and in each, you need to concentrate on different things:
- New category/product — You must provide a clear value proposition for your solution, and it must be easily justifiable internally (and be sure that your buyer has a sufficient budget for it).
- Existing category/product that your client is shopping for — You need to prove why you are better than other alternatives
- Existing category/product that your client is currently using one of your competitors’ solutions and he will need to also pay “switching cost”
Your goal is to remove as many barriers as you can — both in product and GTM, which I will now discuss.
The essentials of Go-to-Market strategy
TAM — Although I’m not a big fan of doing a deep TAM analysis from day one, you do need to work on your big vision, and make sure the market is big enough. You can expand your TAM if you serve multiple verticals and use cases, in more geographies and preferably in a growing market. The question of whether to build a new category or lead/dominate in an existing one has been a long debate that deserves its own discussion. If possible, I would prefer to build a new category.
Land & expand — Looking at the most successful SaaS companies, I discovered they all employ an effective land and expand strategy. How can you significantly increase your sales over the next few years? You can do this by combining a usage-based model (benefit from their organic growth) with multiple products that you can sell directly to your clients (upsell) or to different clients in the same company (cross-sell).
It is always better to learn by example: At my first startup, Tvinci, our pricing model was based on the amount of active users, so we enjoyed organic growth as long as our customers’ business scaled. We provided white label ‘Netflix’ to operators, followed by personalization engines on top of the base platform (upsell). In Kaltura’s case, selling a solution for learning to universities and then selling their marketing department a solution for video webinars for potential candidates (cross-sell).
Land & expand needs to be an integral part of your long-term vision.
Self-serve and Inside sales — Today, it is clear that you must sell remotely in order to scale, at least in most SaaS businesses; inside sales is one way. Self-serve, aka product-driven growth, is another. Smaller ticket sales are usually self-serve and used for velocity. Larger tickets will normally be handled by an actual AE.
It would be fantastic if you can combine the two, but probably not from day one. I suggest that you build your product from the get-go with self-serve in mind, whether you go with inside sales or self-serve. I strongly recommend you watch this video on Consumerization of the Enterprise. Many Saas businesses do not build a massive channel business, but if you do it right, you can scale much, much faster.
Network effect — Ask yourself if there is a network effect. I’ve learned that network effect is more important than IP for internet-related startups. We’ve all encountered an example recently (did I mention Covid?) — Zoom. Having already downloaded and used the product, it is much easier to kick off your next meetings.
Conclusion
Building a company from scratch is both a difficult and rewarding adventure. My partner and I have both been lucky to have gotten it right once in the past. We took our experiences and created a framework that we used throughout our ideation phase to ensure that our current startup (yes, super exciting, but that’s for another time) would have the greatest chances of success. We’re humbled and honored to have the privilege to share our knowledge with other founders.
Remember, finding a partner who complements your core skills, shares your values, and answers your expectations is critical and mandatory. Of no less importance is ensuring that you and your partner can connect with the new market you’re targeting. Validate your idea by meeting with many industry professionals and ensuring that the market size can sustain your vision. Build a simple product that can be easily scaled and modified to additional use cases or verticals. Aim for a no-code approach (if it makes sense) that will make it easy to offer trials of your product that showcase its value. Speak with relevant personas to get worthy feedback that will help you validate your idea.
Try to line up potential customers and design partners before you even start working on your product. Ambitious, I know, but still possible. Make sure you can build a non-linear path to serious revenues within 5 years and sales cycles of less than 3 months.
Be passionate. Founders with a real passion for what they do are much more likely to succeed.
Good luck, and don’t forget to give back to the community as well!
