Why startups should act their age

When an early-stage startup acts like a mature software corporation, progress grinds to a halt. Because the journey towards product-market fit requires high-velocity experimentation, an early-stage startup hindered by a mature business’s ways of working could fail before it gets off the ground. Speed is more important than quality.

Conversely, when a mature product organisation behaves like a startup, with a lackadaisical attitude towards quality and inefficient business operations, it is consumed by technical issues, bugs, tech debt, and HR problems. Quality becomes very important at the expense of speed.

This principle is one of the reasons why it’s so challenging to build a successful startup: what works for you in the early days can be your downfall after you’ve achieved some scale. Similarly, what worked for you at your previous job (at a mature software company) will encumber your new venture. As a result, many startups get stuck in quicksand between product-market fit and scaled success.

If your business has yet to find a product-market fit, your primary goal is to find it. During this phase:

• Speed of product development is much more important than quality. Time to market is all that matters when you are still determining whether your product is useful to anyone. You will throw away much of what you build, so it’s usually a bad idea to gold-plate your work.
• Individual customers have significant influence over the roadmap. You build new features to land specific deals in the sales pipeline.
• Product vision is highly fluid. While early-stage companies usually have a hypothesis about what they should build, new learnings typically have a significant impact on the long-term vision, which could change drastically before product-market fit.
• Any sale is a good sale. Before product-market fit, businesses rarely have a clear idea of their ideal customer, so any new lead is good enough to pursue.
• There is little need for process. During this phase, there is little consistency across the problems you tackle, meaning there is little need for standardised procedures. Small teams require less process because everyone knows everyone and works collaboratively.

After product-market fit, companies must scale their product into their target market. During this phase:

• Product quality becomes much more important. Moving quickly is still critical, but tech debt becomes a significant risk. Bugs aren’t a big deal when you don’t have any customers. When you have many, bugs become a severe concern.
• Priorities are set based on market needs. Individual customers can no longer have much influence over product decisions because this conflicts to satisfy the target market. The company is now building for the majority.
• Product vision becomes more opinionated. While flexibility about how the vision is achieved is still essential during this phase, the vision must stabilise to give consistent direction and focus to the business.
• Sales teams become focused on targeting prospects that meet the ideal customer profile. You disqualify many more leads, and customers are less diverse.
• Standardised processes are required to deliver a good customer experience and achieve economies of scale (i.e., operational efficiency). As the team and customer base grows, the need to standardise how to handle everyday situations becomes clear.

To effectively make decisions, founders and product leaders need awareness of which of these two mindsets to employ. This knowledge is vital when you take advice from consultants and resources like books and blogs: most advice is only relevant before or after product-market fit is found. Applying feedback intended for mature businesses to your small-and-scrappy startup can be a real distraction while applying feedback intended for businesses still searching for product-market fit to a scale-up can lead to an unstructured, chaotic environment. For example, many early-stage companies agonise over technical debt and exhaustive employee onboarding plans when, as important as these things will soon be, they are currently an unnecessary distraction.

2 July, 2023