May 7, 2012
If you’ve ever invested in a startup and the success is based on “The Big Launch”, get ready for a long drawn out investment.
In the past, the new product or new service lifecycle was to have an idea, do market research, build it, do a launch and “they will come” – customers that is. That is not how it has to work, at least not anymore. The systemization of launching Minimal Viable Products and getting immediate customers not just users but actual customer feedback, from day one has allowed startups to rapidly enter markets with much less risk.
So why do so many Startups still build a product “in stealth” or not until it is “ready to launch” before they get it out to the market? The answer is financing.
As investors, we have generally been sold on the dream and potential of the service or product. As such, the startup team is attached and dependent on launching a great product and getting customer adoption – this is generally how startup success is defined.
It rarely works out, in fact I would argue it never works out that a product is launched and becomes an overnight success without already having been in the market and in 100% real world customer development mode. No company ever launches the version 1.0 of their product or service to a 100% success rate, that simply isn’t the reality of the business world.
The challenge for startups is that in order to raise the money, they need to sell the dream of a great product and rapid customer adoption. As a startup investor you should see this type of pitch as a red flag and question the startup team’s attachment to their current view of their product or service.
An approach that is being taken more and more by successful startup investors is measure real world feedback. Not basing success on how many users a startup has but by what feedback the startup is getting from its customers, what they are learning and how fast they are pivoting based on those learning. Also key to note; is that the startup team is letting go of their original assumptions (ego), about their product and the market for it. These are the characteristics that will help ensure customer adoption and ultimate financial success for the startup.
I would not back a team that is dependent on a “Big launch”, (this does not mean products should not have “big” launches but they should occur after the product is already being adopted). I do back teams that are all about learning, pivoting and not about being right but rather doing what is right based on customer feedback.