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The Early Stage Secret

First-principles thinking

I still remember many vivid conversations with other authors, consultants, and thought leaders during the early days of the Lean Startup movement circa 2010.

They were all trying to swim downstream, i.e., following the money, to land consulting gigs with growing startups and corporates. For some inexplicable reason, I found myself swimming the other way alone.

“The best place to look for secrets is where no one else is looking.”
- Peter Thiel, Zero to One

This led to a counter-intuitive secret.

Continuous Innovation Platform

First, the opportunity

Over the last two decades, a startup explosion has spread worldwide, fueled by better access to tools and knowledge. In 2005, there was just one accelerator (Y Combinator). Today, there are over 10,000.

This isn’t the secret, as it was easy to witness this explosion (global entrepreneurial renaissance) even back then.

From a numbers perspective, a growing top of the funnel represents a massive opportunity and what led to the rise of startup accelerators.

But therein lies…

The challenge

Downstream metrics in any system lag and things often get worse before they get better.

Traditional Innovation Funnel is Broken
  • As more ideas enter the top of the funnel, quality suffers. Startup success rates were already dismal. The new challenge for accelerators became identifying the right ideas and teams from the stack of applications,
  • As competition for the best ideas (with traction) grew, incubators appeared on the scene in an attempt to capture even earlier-stage ideas,
  • As every startup is different, the next challenge became scaling limited mentor resources to provide a bespoke experience.
  • Finally, as VCs also moved downstream (to chase traction) and startups have no/limited capital, most of the early-stage business model risk is now carried by accelerators (and Angels) with long payback periods.

So, were my peers right in avoiding getting into the messy early-stage business?

The secret

I, too, used to believe that startups were unique and required bespoke treatment.

I even had a disclaimer in the first edition of Running Lean:

That all changed by the second edition when I started traveling around the world to speak and deliver workshops to founders.

I found that while we (founders) all looked different, spoke different languages, and worked on very different types of products, at a meta-level, we were all the same.

We all wanted the same things, feared the same things, and made the same starting mistakes.

This led to abstracting product-specific tactics to product-agnostic universal first principles and mental models like the ones I write about in this newsletter.

I dropped the disclaimer and spent the next several years surrounding myself with a wide array of products and teams to put these abstractions to the test.

I found that:

The early stage journey is much more systematic and predictable than the later stages (the secret).

This certainly surprised me.

I found it to be true across product types.

In other words, the tactics to grow a high-ticket B2B company are widely different from those growing a smaller-ticket B2C company, but the tactics for getting from idea to repeatable traction (first 10-20 customers) can be the same.

It’s also true across startups and corporates launching new products.

While a simple secret, it has massive ramifications.

It means:

  • Early-stage ideas can be normalized and evaluated empirically,
  • Cycle times can be shortened from 9-12 months for incubation to 3 months to early traction,
  • Mentorship doesn’t have to be bespoke, which means it can be repeatable,
  • Mentorship doesn’t require domain experts, which means it can be scalable,
  • Your portfolio doesn’t have to be vertical. You can carry a diverse basket of ideas in your portfolio.
  • You don’t have to limit yourself to working with a handful of startups per year. You can impact hundreds, even thousands of startups per year (and get paid).
  • You can do this both for startups and corporates.

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