9 Lessons from a Year of Venture Building Experiments
"It's not because things are difficult that we dare not venture. It's because we dare not venture that they are difficult" - Lucius Annaeus Seneca
I spent the last year systematically experimenting with venture building, outside of my full-time job and while my toddler wasn't keeping me busy. I went through Entrepreneur First, Hatch, the Wharton Entrepreneurship Acceleration Programme and the Founders Institute. Each venture experiment allowed me to:
Thanks to these experiments I have a better understanding of new ventures at an early stage. As an innovation practitioner, this is invaluable.
Here are the 9 lessons I learnt. I hope they help you as you step bravely into venture experimentation.
Lesson 1: The question is the problem so take time to validate your question
The toughest abysm to cross towards real customers is our internally-rooted confirmation bias. Sometimes we spot a gap and quickly begin imagining solutions to overcome the gap. We don't:
Probably the most relevant step in venture building is defining the question that guides the venture at its core. For example, "what if you could easily self-monitor and improve your workplace communication daily as a non-native English speaker?" is a very different problem question from "what if we could understand other teams' communication styles to better work together?" .
Furthermore, reframing the question opens different possibilities. For example, "how might we improve non-native English speakers' communication effectiveness so they can feel self-confident?" opens totally different solution opportunities than "how might we help different teams within an organisation care about each other so they can authentically collaborate?"
Wondering about our question might be the single most relevant step for problem validation because the question is the problem.
Lesson 2: Validate the problem-solution fit, not the product design
A previous CEO I worked for introduced me to two important lessons: never split the differences and identify customer solutions, not products. In venture building, the second lesson is particularly useful. Overfocusing on a product design can make us lose sight of how we can solve a problem without a product. Here is an example. To level up professional immigrants' effective communication at work, my user research suggested that they needed to:
So I designed a product focused on improving the self-monitoring of communication skills in real-time through bespoke feedback ( Image N|1 ).
Image N|1. The Grammarly for Virtual Communications.
During your zoom meetings, this plugin would allow you to spot opportunities to communicate better as a non-native English speaker. If monitoring in real time wasn't your preference, after your meeting, you could receive post-meeting performance analysis, trends, and recommendations to keep improving.
The solution approach was more raw and useful for multiple product iterations once validated ( Image N|2 ). It allowed imagining different mixes to solve our customer pain. Products and services could be combined & tested. Different technologies could be combined to support our customer pain. The user journeys could be adapted.
Image N|2. The solution backbone.
Getting stuck in a product design too early could move you away from the possibilities a solution offers.
Lesson 3: Validating traction is easy, overcoming our fear of failure isn't
If you have been through IDEO U, Entrepreneur First, Founder Institute or Hatch, you have been encouraged to "kill your baby from day one". You have also built a toolkit for testing. You learn that failing fast rather than muddling through failure is life biggest gift. It saves you resources and provides you with learnings you can execute.
The blockers with traction that I faced with my teams were around not wanting to systematically test the personas identified, overcomplicating the testing, and being afraid to explore monetisation early on. Everyone had this internal panic about something that wasn't a big deal in the bigger scheme of things.
In venture design and testing, the best thing you can do is get feedback fast. If you are a perfectionist with testing, embrace an incrementalist approach. Begin with simple testing, and learn. Then you can move to more "perfect" testing approaches. We literally drew two buckets: tests we can do today and perfect/ideal tests. We learned that simple testing was possible on the same day and that our fear of failure was behind the perfect/ideal tests.
In synthesis, it is normal to panic internally but don't let it keep you from gathering information for better decision-making and development.
Lesson 4: Play with Market Size and Competitors
Not every problem is "oxygen", common, and recurrent for potential customers but when it is, we could be stepping into a billion dollar problem.
Without going into the nuances of Market Sizing, my key learning is if you want a multibillion dollars company and your market can't meet your aims, you are just making a wish. The market ultimately determines your opportunities. A great exercise is to explore your direct and indirect competitors. Check how they are defining their market. For example, when we sized our solution for immigrants in the Learning and Development market, the size was 367 billion but if the solution was approached with a mental health angle we were tapping into 560.33 billion. In what market do we want to play given our potential customer pain? Which market allows us to differentiate from the start as we approach the struggle? Which market structure is more "friendly" for growth? Which market allows us to 10x our impact? For which market do we have an unfair advantage?
Sitting down and analysing:
Provides you with a quick and viable market research & playground. Your solution can play with market boundaries. This is called strategy.
After this initial analysis, you can sit down again to properly estimate your top-down and bottom-up ( if possible) total addressable market ( TAM ), serviceable available market ( SAM ), and serviceable obtainable market ( SOM ). Check the compound annual growth rate ( CAGR ) and scalable adjacent markets.
To conclude, here's an additional note on competitors. You don't want to overfocus on them but be resourceful. Competitors are valuable data points. They help validate that there is a market opportunity and provide you with configuration, offering, and experience data. For our venture experiment, competitors provided us with relevant business models and pricing learnings. I used these learnings to identify gaps and monetisation mixes. Some examples of tests we conducted were:
领英推荐
Lesson 5: Drop Go-To-Market Strategies that are 'Mirrors' or 'Supermarket Bags'
For a working-from-everywhere venture experiment, our go-to-market (GTM) strategy was:
B2C → B2B. A similar strategy to Slack! B2C faster, more urgent need, feeling the pain the most. B2B is forced to adopt with enough product champions internally, and when other companies begin to adopt
It was a mirror of Slack's strategy and yet, the trigger points, adoption, and influence journey for the potential customer were different.
Four hours later, we moved to a 'supermarket bag': Multiple things together without a single focus. One slide, with four key streams, and 11 actions for GTM.
The best go-to-market strategies are simple. Tailored to the targetted persona and their adoption journey. Make use of tested acquisition channels. Allow measurement and cost tracking. A great example is Robinhood. Their GTM got them 1,000,000 users in year 1 with a simple approach:
Simplicity helps with your GTM experimentation and quick improvement.
Lesson 6: The LTV/CAC Ratio AND Customer Equity matter
Many Founders have gone through the calculation of their customer acquisition cost ( CAC ) and customer lifetime value ( CLV or LTV). Usually, people will mention that ideally, your spending on acquiring a new customer should be three times less than the lifetime value of that customer. I mention "usually" because it varies according to the type of product, sector, etc.
Overfocusing on LTV/CAC ratio early on narrows the strategic playground. It could anchor us in the Direct Value that comes from customer equity, leaving to the side the value we can extract from information, communication, and the relationship with the customer from early on ( Image N|3 ).
Image N|3. Customer Equity
Source: Wharton Entrepreneurship Acceleration Program.
Focusing on customer equity can compound the early wins and diversify customer value over time ( Image N|4 ).
Image N|4. Customer Value Overtime
Source: Wharton Entrepreneurship Acceleration Program.
Lesson 7: Identify your sales playground
Having worked in sales, here the key reminder is to give priority to:
These elements will provide you with an initial sales playground to work and test as a team.
Lesson 8: A curious and capable team first of all!
Ultimately, venture building is a team sport. Having the right and unique capabilities for problem-solving is fundamental.
You can be the right team with the wrong problem and end up pivoting. You can be the wrong team with the right problem and end up with a great opportunity for the taking. You can be the wrong team with the wrong problem and end up moving on. And you can be the right team and the right problem and end up on your journey towards success.
Whichever is your case, my learning is that a great team is ambitious, moves fast, and is caring. Great teams say "we can". They test and learn fast. They foster autonomy, mastery, respect, fun, honesty, and accountability. With a great team, in a weekly sprint, you get learnings, outcomes, and bonding.
Finally, I learned that venture building is more about staying curious rather than being right. Even if you discovered that your venture idea doesn't have market fit ( ???? ), you learn so much from creating and testing. You don't want to get stuck for years in something that isn't relevant. Life is too short to not create value and impact positively.
Lesson 9: Have fun and Pitch!
Ultimately you are betting on a hypothesis. Reality can reject it and that's fine. Focus on giving your best, and having fun. Take the learnings as part of your life journey.
Finally, don't miss out on Pitching. The Pitch is where everything comes together and is exhilarating. Founders Institute was really extraordinary for testing out pitches. I learned problem, opportunity, and team Pitch formats. I also learned how to build pitches of different lengths and the key structures. They were obsessive with the pitching and they were really extraordinary with this.
Wrap-up!
These are some reflections on my venture experiments. I hope they are helpful for people who want to experiment with venture ideas. I hope sharing my failures & positive experiences reduces your fear to experiment.
Hasta luego,
Nastasha Velasco