The Science of Simplicity
Why keeping it simple is the secret to finding Product-Market Fit and raising your Series A
The single hardest thing for any startup to accomplish is achieving Product-Market Fit. Product-Market Fit (PMF) is defined differently for every startup, but can most generally be described as the moment when there is “proof” that the market has demand for a company’s core product. For a young startup, reaching PMF is really the only thing that matters and most Series A investors won’t touch a startup until PMF has been achieved.
Despite PMF being the gating factor for Series A funding, I see plenty of founders/VCs preaching artificial revenue milestones for Series A readiness. Yes, revenue may be helpful, but having $100k of MRR doesn’t necessarily mean you have PMF. All too often, I’ve seen founders seek revenue by all means necessary, when in reality this often takes you even further away from demonstrating a succinct product, the market’s need and your customer’s willingness to buy said product.
The point of seed capital is simple, it’s an experiment. I deliberately quoted “proof” above, since I believe seed capital is best used for the scientific method — to prove or disprove a single hypothesis about the market. Assuming that a startup can build its core product with the limited capital available in a seed round (NOTE: this may or may not be possible for capital intensive enterprise infrastructure opportunities), the only other objective should be to prove that there is market demand for your product. If a company has PMF, it fundamentally shouldn’t matter whether they’ve sold $30k MRR or $300k MRR because the sales operations math should work out with enough time and capital.
Nonetheless, plenty of startups spend their scarce resources experimenting on countless channels and attempting to prove aspects of the business that aren’t necessary until later stages. All too often, I see these founders chasing partnerships / deals that are outside of their core use case or developing adjacent solutions that they can charge for, but ultimately don’t demonstrate the core product’s need. In many ways, this breaks down the objectivity of the seed round experiment. Like any science experiment, the more variables you add to the equation, the harder is to determine the validity of the results. Trying to prove multiple products, channels and strategies all at the same time is also extremely difficult. While a multi-prong approach may bring revenue in the door and gain the eye of investors building a DCF model at seed stage, it could also lead you down a path where you are funding a strategy and/or product that won’t scale. Worse yet, it can also lead to founders moving on from extremely valuable products that would have been successful if the right resources were dedicated to them. Failure isn’t great, but failure without learning is even worse. If one of my companies has to pivot, that’s fine, but I want to know that we’ve explored that path with everything we have so that we can move forward without any doubts about ‘what could have been’.
For this reason, startups need to keep it simple. Figure out what you need to do to prove PMF and dedicate all your resources to achieving that objective. If things aren’t working, pivot but do so decisively and burn the bridge behind you. Straying away from your core strategy for the sake of revenue without a larger plan for demonstrating the market’s demand for your product will likely leave you struggling for direction and scale. Prove and/or disprove your hypothesis and if successful in finding PMF, the dollars (whether from customers or investors) will follow.
