For early-stage startups, technical feats are the least important evidence of their potential.
January 31st will be my last day at Matter. It’s been an honor and privilege, and the three years I got here will continue to influence how I approach work for the rest of my life. Rather than fully enumerate how, I wanted to sign off from my run with one lesson I learned through experience. Thank you. Change media for good.
As the somewhat rare investor and startup advisor who comes to the space from a design and product strategy perspective primarily, I have a reputation for saying the same things over again to every founder I meet:
“Who is this for? Specifically.
“Have you met them? What are their lives like? Where does this fit in?
“How are they going to find out about it? What are you trying to replace that they use now? Why is this better?
“Do they think it’s better? How do you know?”
Yes, I won’t shut up about people. The soft stuff. The squishy substance that self-proclaimed visionaries ignore as they build their brilliant idea that will upend the status quo, so long as it just manages to get some traction. “If you build it, they will come,” as the fictional owner of a ghost baseball stadium in a corn field taught us all about entrepreneurship.
It should come as little surprise that a lot of startups take a long time to listen to me, whether I work closely with them or I just know them casually. Entrepreneurs regard themselves, often correctly, as mavericks, and mavericks don’t do market research. They get insights about the world, and they move fast and break things until everyone else catches up.
Although some startups manage to get gigantic without ever carefully observing people and figuring out which specific problem to solve in which context for which specific person, most will eventually hit a wall if they try to simply hack their way to product/market fit. Then they pick up the pieces, develop real empathy with a real person, make major product and business changes, and make more progress forward in a few weeks than they did in months or years. It’s not inevitable, but it’s common enough that I’ve started to develop a gut sense for when an individual leader is ready to stop trying to “educate the user” and instead educate themselves on what the user needs in the first place.
This pattern tends to recur. The interesting question is, why does it keep repeating, and how can entrepreneurs and their human-centered advisors interrupt this pattern? How can more startups find real inspiration for their companies faster without hitting that wall in the first place? Human-centered design-driven startups (especially those with designers on the founding team) have succeeded tremendously, perhaps most notably at Airbnb. Why, then, is design thinking such a hard process and mindset for entrepreneurs outside this set to adopt and implement?
Through thought and reflection, I’ve concluded there are two factors at play:
- Entrepreneurs dramatically underestimate how much investors value true insight about users and markets when making investment decisions (and founders are often, by personality and experience, not the most into asking random strangers to criticize their ideas).
- Human-centered design advocates can express their perspectives so forcefully and dogmatically that they can come across as dismissive of other approaches, unconsciously denigrating the mindsets and processes of the entrepreneurs they advise. Worse, design thinking can sound culty and evidence-free in a way that raises founders’ anti-brainwashing and anti-conformity defenses.
I’ll start by explicating the first point to make a case for why entrepreneurs ignore the imperative to be obsessed with the people they’re building their products for at great peril to their future success — and their future funding.
You can’t fake knowing your market.
It’s about risk. The job of a venture-backed entrepreneur is to identify key risks in their company, raise money to reduce those risks, and then watch valuation increase as the venture becomes less risky and later-stage investors see the startup as validated. This pattern repeats for each round of funding if successful.
But all risks are not created equal. There are risks investors can live with and risks they cannot. Above everything else, they look at the team risk. Have these founders worked together before? What have they accomplished? Are they committed and stable, or are they going to break apart at the first moment of conflict.
But assuming you’ve got a great team, there are three types of risk that investors care about: market, technical, and business risk. Or, as Corey articulated early in Matter’s life, what design thinkers call viability, feasibility, and desirability.
Technical risk is straightforward: can it be built with the time, resources, and team potentially at your disposal? Business risk is, too: Can this make money soon and/or at scale, and are there big competitors we need to worry about?
But then there’s market risk, which really comes down to the same question I and many other design thinkers always bang on about: is there at least one customer who cares about this problem, and, if so, are there enough of those customers in the market for this to be a problem worth solving with a venture-backed startup? At the end of the day, is this desirable enough?
Many new founders assume that it’s important to present a promising risk profile in all three of these areas, that you just want to look like you’re winning generally. But as I learned from long-time Matter mentor Brendan, this is the fundamental error of pursuing credibility at the expense of notability. Every early stage startup is flawed, so a bulletproof, optimistic story does nothing but raise the suspicions of investors. It’s far better to be several standard deviations above average in one area and look questionable in the others than to try to be well-rounded if unmemorable.
And if you’re going to be notable, market risk is a really good area to stand out! Remember, after team risk, investors care more about market risk than anything else, which is why the Matter accelerator emphasized validating desirability above all else. To an investor, if you’re solving the wrong problem, literally nothing else matters. It doesn’t matter how challenging to develop your tech is, it doesn’t matter what remarkable unit economics you could achieve at scale: a startup that isn’t solving a real user need is a great vehicle for setting millions of dollars and the best years of your life on fire. Other than describing a startup as “too early for us” or “playing in too small a market,” there is no more damning phrase in the mouth of an investor than “this feels like a solution in search of a problem.” If you hear that, congratulations: in a best case, you just might have the next Yo on your hands.
To really drive this back to the underestimation issue I mentioned above: investors can tell when you don’t really know your market risk, or when you’re waving your hands and citing top-down trends as a way to share insight about your users. This flaw in your venture’s story glistens like flop sweat on a comedian’s forehead at their first open mic. There’s no recovering from it.
What investors want to walk away from a pitch feeling about a startup’s market risk is the following: “Wow. That entrepreneur taught me a lot about a market I thought I understood before because they are obsessed with the people who live in it and have genuine insight that almost no one else does. I’m not sure yet if the market is definitely big enough or if their approach is a perfect fit for our investment thesis, but that team is going places, and I can’t imagine who would be able to keep up with them in solving that particular problem.” That’s what a win in a pitch meeting looks like. That doesn’t guarantee you get a check, but it’s the bar you have to clear.
The upshot is this: When an earnest, yammering, human-centered design advisor tells you nothing matters unless you nail who your user is, the context in which they live, the need you’re solving, and a set of insights that mean you’re uniquely able to define a resonant solution for the market, you should listen. Step away from the keyboard. Stop reading your (likely statistically insignificant) analytics for awhile. Close your list of priority features for your next release. Stop doing anything until you can paint an honest picture of your user and why their circumstances wouldn’t just welcome a new solution — they demand it. That’s the substance of your product and company. Everything else is irrelevant until you know that.
End shaming of entrepreneurs.
You’re not getting off easy either, design evangelists.
Now it’s time to shame the true believer design advocates among whom I grew up: the arguments you’re making to try to convince people to take a more empathy-driven approach often come across as condescending, generic, or, worse in the eyes of many, idealistic to the point of dangerous naïveté.
Let’s face some facts: plenty — almost certainly the majority — of products and startups created through design thinking processes still fail. Ultimately, luck and timing play as big or a bigger role than whether or not the founders spoke to enough potential customers and had a pithy POV statement that every employee could recite backwards from memory. I firmly believe that following a human-centered process and, more importantly, possessing a curious, human-centered mindset both increase — often dramatically so — the odds of a product or startup’s success. But neither comes close to providing a certain pathway to the top, and it reduces credibility to talk as if they do.
But even that last message often gets lost between advisor and founders. The case for a design-driven approach to entrepreneurship often summons the (deservedly legendary) skepticism of founders, and both parties suddenly find themselves in the most intransigent debate of all: attempting to prove or disprove the validity of an approach that itself isn’t rooted in statistics or unassailable logic. As is inevitable in all such circumstances, no one learns anything and everyone walks away more committed to their side of the argument than they were at the outset.
How and why do we get here? It stems from both founders and design advocates spending far too much time talking about the past of the venture in question and not enough time talking about the future. Here’s how it plays out: A new design mentor, advisor, or investor, asks to hear the history of how a startup came to be: the inspiration, the leap of faith to quit the day job, the different versions of the product, the many ups, the many downs, and the many, many in-betweens.
And, rather than take this history as a narrative for understanding where the founders are coming from — rather than actually practicing empathy for entrepreneurs —some try to impose a cookie-cutter template on the way things could have gone if only the founders had already been enlightened to the true way of design thinking. That failed first product whose many incorrect assumptions you ultimately discarded after pouring your heart into it? Wouldn’t it have been great to know it was the wrong thing and moved onto the next thing before you invested six months and your life savings in it?
Sure, it would be great! But you’re not going to convince an entrepreneur who has sacrificed and done what most would regard as risky or crazy that their hard-earned lessons could have been learned much faster if only they listened more to experts and ordinary people than by trusting their guts and following their passions. This is made even worse if you have not been a founder of a startup yourself, because that makes it all too easy to set your views aside. It’s just a fundamentally incompatible pair of perspectives that can sound like the design evangelist is saying the entrepreneur’s approach to building a startup is wrong and, on the flip side, can sound like the entrepreneurs don’t think they have anything to learn and don’t believe anyone understands what they’ve been through. What’s worse that sometimes actually is what both sides mean.
The clashes between intuition and evidence, between art and science, have raged for millennia, and they will continue to. But no one involved in early stage startups have the time or energy to relitigate those clashes. For design mentors and advisors to add value to a startup, they need to practice what they preach. They need to observe carefully and then identify opportunities to coach founders on how to inject more of a focus on people, prototyping, and quick experimentation into their venture that will not only help them build a better product and business down the line, but will, crucially, save time and money and increase the odds of building a company that investors back with huge sums of money.
That kind of convergent goal, that focus on a future state and how to get to an even better level of performance — not conducting a tedious at best, insulting at worst, postmortem of the history of the company to date — is where human-centered design becomes a giant booster rocket to the launch and long-term trajectory of a startup.
The good news is that the goal of breakout success is already shared between advisor and entrepreneur. All that needs to happen to enable that collaboration is to embrace a helpful pair of assumptions. Founders: a focus on the user is not a distraction, and its absence can easily kill an investor’s interest in you. Design advisors: Your job is to make the future even better, not to criticize the past. That’s it.
Now. Let’s do something amazing together.