I just had a great coffee convo with a friend in Palo Alto and wanted to quickly write up one fun point we talked about during the conversation: In the initial phases of a startup, the goal is to minimize the time it takes to get to product/market fit while maximizing the strategic differentiation of the long-term business.
It turns out they are a bit in opposition to each other, which I'll describe below.
Startups need to get to "Product/Market Fit" or die trying. Most die trying. Steve Blank talks about the idea that tech companies die because of lack of customers, not inability to build technology. Marc Andreessen says it's the only thing that matters. Basically you want to get to the point where your product is working, and if you can't get there within the first 1-2 years of your company's existence, you generally run out of money or your team falls apart.
So I'll define a new term: TTPMF - the "Time to Product/Market Fit." You want to get TTPMF down to the point where you can achieve it, scale up the business enough on traction to either reach profitability or to raise your next round. If your plan for TTPMF exceeds your funding runway, you're already dead.
Luckily, it turns out that getting a low TTPMF is very easy: Just completely copy something that's already at P/M fit. With so many startups that fail because of lack of P/M fit, you'd think it'd be obvious- it's easy right?
Now, if you find that yucky or undesirable, I'm with you. It turns out that although there's an advantage in reducing TTPMF, cloning products has a lot of business (and ethical, and personal) weaknesses.
Let's discuss those weaknesses.
Long-term Strategic Value
If you make it an explicit goal of reducing TTPMF, you might think that cloning is great- but be aware that a 100% clone has many weaknesses:
- It's uninspired
- You'll never get to #1 since you can't switch existing customers over
- You'll never grow the market in a new direction, giving you a different base of users- compared to an incumbent competitor
- You let a competitor define the market, and you play catch up- you can never play offense
- If it's a networks-effects business, you can't just clone a product, you have to clone a community. That's hard.
- .. among many other issues.
Thus, I don't think you ever want to do a full clone.
Instead, you want to keep the fundamentals the same (80%) while substantially reinventing 20% of the product. That addresses the issues above. There's a lot of stock methods of reinventing the 20%- you can do this in the cheaper/better/faster variety, or to go to a niche, or to go with some other segmentation. (Again, refer to Steve Blank's blog for more details on this).
Each of these approaches allows you to create product differentiation which lets you either suck in a different set of users than the incumbent competitor. It lets you head in a different direction so that you can provide a better product for some %, and define that part of the market on your terms. Long-term this provides a more sustainable foundation for the company so you compete more effectively against others in the market.
Thus, don't just clone, though I think most people make the opposite mistake by trying to invent too much.
How to balance?
So between the two, you can guess how I land on balancing the opposing forces of TTPMF versus Long-term Strategic Value: More than anything, I believe in reducing TTPMF.
In most circumstances, I don't even think entrepreneurs really have a choice. TTPMF has to be less than 1-2 years or else your startup will implode. Ask anyone who's been working on a product for more than 2 years and doesn't have traction to show: It really, really sucks. The first 6 months can be fun because it feels like you're painting on a blank canvas, but soon enough, there's just fatigue and the window of opportunity shifts. Platforms change, investors get disengaged, your employees start getting excited about other companies. So if you miss your window, then you'll run out of money or energy or both.
And perhaps this is unfairly treated as a either/or decision, because in reality it's not. You can get both a low TTPMF as well as a ton of strategic differentiation in the market, and I wouldn't settle on anything but an idea that has both baked in.
The reality in the 2013 fundraising market
Given the Series A crunch on everyone's mind, let's put a quantitative range on what TTPMF has to be to successfully raise an A.
If you're a consumer product company with the following characteristics:
- $40k/month in burn from a team of 4 FTEs
- $1M raise, so ~2yrs of runway
- 6 months to raise the Series A, so really 18 months of operating time
- Target 1 million installs before raising the A
- 3 months to build version 1.0 and release it
If you believe the numbers above, then how much time do you really have for TTPMF?
First, the optimistic case:
TTPMF = instant. This means that you have 3 months of development to release the v1, and you instantly have great engagement. Then you have 15 months to work on growth, getting it eventually average 2,000 signups/day, to hit 1 million installs to get ready for your Series A. Not bad, and sound doable if you have a low TTPMF.
But what if you have to pivot once or twice? And then you're 12 months in? Well, turns out you're not left much time to work on marketing.
TTPMF = 12 months This means you'll have 3 months to release the v1, then 12 months of iterations. At this point, you'll have 9 months left before your Series A raise, and you'll need to scramble on marketing to get to 11,000 signups/day to reach 1 million.
That's scary stuff, and doesn't leave you much time to focus on your Facebook integrations, optimizing your signup flows, etc. Believe me, getting user engagement is hard enough, but when you couple it with a high bar on user growth, it's 10x harder. So leave enough time to work on your marketing optimizations to get your product going.
And then by the end of it, you're in a death spiral like what I previously described in Mobile App Startups are Failing Like It's 1999.
Get that extra time by leading with the problem of TTPMF, but don't forget to keep the big picture in mind also.