Are you close?

Are you close?
Photo by Donald Giannatti / Unsplash

Yesterday, with June coming to an end, I took a look in the rearview of my second startup to reflect on how I felt now versus seven months ago:

The change in February — the month we grew 100%+, finally giving us evidence things had changed, is what catches most people's attention. Rightfully so: it was the month we were grasping for.

But as the red text highlights, my fascination of late is trying to figure out whether I, even knowing what I know now, could have known that we were close. "I know it sucks now but the riders are about to appear over the foothills and the wizard is gonna be all shiny and glowing now and totally kick ass for you!"

What complicates this question is the full extent of our seed stage trek:

As Dylan said: "Behind every beautiful thing, there's some kind of pain", and boy, this was a train of it. The long, 98-99-100-look-dad-there's-even-more-101-102, freight cars kind of train. First nothing, then tiny, lumpy, bigger and lumpy, then a reset/pivot, then slow linear, then ... ta-da!

Math, Three Ways

When the world gets tough, I like to turn to math. For me, there's a firm comfort in the physics of things — laws that don't break for anyone.

If product/market-fit is multiplicative, then your business a product, and products are fun because they can be arbitrarily long, and the more variables you introduce, the larger the results can vary, and those differences compound:

  • 1 x 1 = 1
  • 0.9 x 0.9 = 0.81

In a two-variable world, being off by "that last 10%" costs you a mere 19% difference! It stings, but that's still a B in some schools. Yet:

  • 0.9 x 0.9 x 0.9 x 0.9 x 0.9 x 0.9 = ~0.53%

In a six-variable world you're (probably) failing; and, bad news, Alex Osterwalder's model of business has 9 boxes:

90% to the sixth? Yeah, that's a 38% summer-school-required kind of score.

Does this mean you have to be perfect in every category to get a great score?

Yes, and no.

It does mean that you can't have any zeroes, that nasty number with a salacious history, as that will immediately tank your score to, well, zero.

But there's another way: make your numbers a lot bigger!

You mean the 100%? No, I mean the of what.

Up until now we assumed that the of what were constant.

(100% of this) x (100% of that) vs. (90% of this) x (90% of that)

But what if we change of whats?

(90% of 10) vs. (100% of 10) — here, we can push super hard to get that last 10% and we yield an extra ... 1.

But if we change our of what to 100:

(90% of 100) vs. (100% of 100)

Now that extra 10% is 10! Worth it? It just might be.

Even better, (90% of 100) is 80 more than (100% of 10)!

If you're willing to change your of whats, you actually have to suck pretty bad (<10%) before you're doing as poorly as you were before.

Premature Optimization

Unfortunately, founders hate changing their of whats.

“The real problem is that programmers have spent far too much time worrying about efficiency in the wrong places and at the wrong times; premature optimization is the root of all evil (or at least most of it) in programming.”

The evil Knuth attacks here is just as prevalent in seed stage business innovation. We finally get something working. This is super hard in and of itself. Zero to one, iykyk.

So our immediate desire is to do what with the first non-zero that comes along? Optimize! And optimization is a percentage game: "Let's push our conversion rates from 30% to 35%!"

This is the world Summit could have entered in mid-to-late 2022. The stretch below the fmllllllllll? That's a business that's working. Notice the lack of the churn-induced lumpiness of prior business model iterations.

Imagine if we had raised $M's in funding at that point (Sept '22-ish). Barring total incompetence (hey!), we probably could have grown it to an admirable size.

But we'd have missed the much more scale-worthy thing that was around the corner. And we got there by changing an of what. In our case, we started selling to VP's instead of individual contributors, which allowed us to revise our pricing (by 20-40x). Not because we were greedy (!), but because the platform was just that much more valuable when delivered to the right audience.

Pushback or Push Forward

Yes, it may be the case that you've gotten to optimization land. In that case, you've maxed out your of whats, and it's time to tweak.

But if you haven't firmly grounded your of whats — if you've accepted them because "that's just what people pay for software like this" or "these are the people that have always bought this", then you may be dangerously close to a much better thing.

Poke on your assumptions to see what wobbles. Something you assumed to be a constant may be a variable in disguise.