“At Y Combinator, we see a lot of companies who raise money on demo day as you can imagine, but still the vast majority of them die and about 70% of them do not go on to find any form of product market fit. Here are the most common trends”
Michael Seibel
I found an online talk by Michael Seibel here (https://www.youtube.com/watch?v=Dgmmje5WHWA) that described literally every issue I have encountered since starting. It is the most relevant and useful advice I have seen in a long time. I wrote them down and organized the content into something people can skim and google easily.
Turning your investor into your boss and doing what they tell you to do is a very very easy way to die.
The Causes
Fear and self-doubt
Every founder has fear and self-doubt. It is just part of the game. If you can process that fear and self-doubt and continue to execute, you’re in a good position. If you use that fear and self-doubt to seek out someone to tell you what to do, you are typically in a position of hurting your company.
The false assumption that there are 100 repeatable paths to victory
You think “My investors have done it before. If i just follow what they do, I can do it too. This is honestly a very fair feeling. In most careers, it is true. If you have a mentor as a great lawyer and you do what they tell you to do, you can probably get into a good law school. You can get into a good law firm. Same for doctors, same for bankers.
Unfortunately in our game here, it is very very hard to repeat success that someone else has done. The business environment just changes. Some of the rules are applicable, some are not.
Rote repeating is very hard.
Lack of talking to customers
When you stop talking to customers, you stop getting insights on what is wrong and what is right about your product.
In the process of seeking out those insights, you might go to your investors. Your investors certainly won’t be talking to your customers more than you should be.
Signs this is happening
You are feeling pressure to spend more money than you want to.
You are hiring faster than you thought you should or that you created a plan for.
One big trick here is you’ve decided to hire a recruiter pre-product market fit. That’s a big sign here.
You’re burning more money every month, but your primary KPI is not increasing
You’ve locked in with one investor and closed off communication with others.
The belief that if you follow the plan the investor has given you, they will backstop you even if you don’t hit your numbers.
Those are the signs you’ve made the investor your boss.
Competitive Measures
Continue to talk to your customers
The more you interact with your customers, the more you onboard them, the
more you talk to them – the more you will have insights. Insights that allow you to figure out what needs to be built so you won’t have to look for external experts to tell you what to build.
Have a real KPI. Have real metrics.
You need to have numbers that can give you confidence in what you’re doing so that you don’t seek out experts.
Track retention
Keep a low burn
You don’t want to depend on your investors to give you more money pre-product market fit. Keep a low burn.
Do a startup in a space you have some organic insights in
Do a startup in a space that you have strong opinions in so that you can trust those opinions.
Know that you’re the one who gives investors power over your business
If you’re doing what your investors told you to do, you are literally giving them power over you. All they can do is use words. If you do not want your investors to have power over you, don’t give it to them. They are not gonna come beat you up. They are not going to kidnap your family, none of that.