The best founders ensure that their startups learn continuously, and iterate + improve their strategy, tactics and playbook constantly. They ensure this learning through three routes. These are
- learning from customers, enabled through speedy product iterations
- learning from external talent / interviewes, via the hiring process
- learning from VCs / investors via the fundraising process or investor meetings.
In that order. Customers / product iterations are the most important source of learning, then the hiring process and finally fundraising.
Let us unpack this.
Caveat: A lot of the below is written from the point of the pre-Series A / seed-stage startup. That is the stage I know best, given that I work in Blume Ventures, which invests exclusively at the seed / pre-Series A stage. At this stage (pre-Series A) the startup is seeking PMF or Product-Market Fit. PMF is achieved when there is a product that address customer problems well, with a clear go-to-market approach (GTM), and a scalable growth or sales machine, i.e., 1 rupee invested in the growth machine results in 1+ rupee revenue. At this point Series A and growth capital flows in. For this article, please presume that when I say startup, it means a prePMF or pre-Series A startup.
Learning from customers
Customers are the most important learning route. After all, your startup exists because of a problem the customers have & because your startup’s solution is the optimal way to address it. In most cases the problem is something that the startup founder personally has – either because s/he has been a customer before or knows this customer segment well.
So clearly the founder(s) know the customer problem well. But that isn’t enough. What you are striving for in the startup is to arrive at a scalable solution – a product that can scale to the entire addressable market ideally. This means you now need go beyond the customer problem to learn how the customer interacts with your solution – do they find it addresses the problem well? Are they using it as per your original plan? Are they able to adopt / buy it as per your plan?
How do you find the above out? The best customer feedback is not by hearing them talk, but seeing how they interact with the product – buying it, or using it. For that you have to put the product in front of them and see their reaction or behaviour. Then you learn from the feedback and reactions you get, and further iterate the product. And again go back to them with the product. The faster the pace of product iteration, the faster the learning cycles.
Thus what matters here (learnings from customers) is speeding up product iteration to get faster (and better) customer feedback.
Learning from hiring
The 2nd biggest source of learning is hiring. Even if your team is built, you need to keep meeting candidates. It is not just building optionality but also finding out and how easy or tough it is to get alpha talent to meet you. You also find out about the strength of your recruitment brand. And through those interactions, learning about what this talent thinks about you (and what is happening in their industries or world).
For this to effectively happen, the founder should ideally invest time in both reaching out as well as meetings. Reaching out, and getting a reaction back, or not, and then pushing for a meeting is a great way for the founder to know the strength of the brand s/he has built.
Learning from investor meetings
The 3rd source is from investor interactions which you should do even if you have a long enough runway. Now VCs are of all kinds – some are great, some are not so good. But in each meeting you have to articulate the problem, how your solution is superior, how the go to market approach is working etc etc. Whilst doing so, you end up articulating the proposition repeatedly. Often there is an interesting discussion during which you have to defend your strategy / playbook. The end result is that you walk away from the meeting enriched by the discussion.
At the very least, you should get an investor perspective, and a view of the landscape, and how they view the world. Often you get a sense of how your metrics stack up, how well you are doing and what you need to improve on.
Sometimes even if the discussion isn’t relevant, the very fact of talking and thinking over the topic again and again leads to interesting ideas – one which you wouldn’t have thought of otherwise.
There is also one unfair advantage VCs have. They ask the seemingly obvious / stupid question that no one usually asks you, but which you now have to answer, e.g., why do you always do it this way? why don’t you do this? etc. Sometimes these may have become blindspots, or sometimes they become the elephant in the room that no one wishes to address (your cofounders or your colleagues etc.) and having to address it in a meeting with the VC can help you identify them faster.
This dynamic is there with the founder’s existing investors too. This is one reason why more frequent interactions between the VC lead / board member and the founder, help the founder. It isn’t that the VC has some magical insight in to your business even s/he has invested in it. Or even if s/he has seen a large number of such ventures. It does help. But the real magic is the seemingly obvious question(s) the VC can ask and the founder has to attempt an answer, and thereby the learning or new ideas that come with the attempt to articulate an answer.
(As an aside, recruiting interviews also have this kind of a dynamic. Articulating the company’s purpose, addressing questions around product strategy with alpha talent, also gives the founders interesting learnings and insights.)
To wrap, keep iterating your product to put it in front of customers (to learn from customers), keep the hiring process on even if all roles are filled (to learn from yourself / interviewees), and continue to do investor meetings even if you have a long enough runway (to learn from yourself / VCs).