11 Misconceptions Held by Early Stage Founders
"Do this, don't do that, can't you read the sign?" There's an overwhelming amount of noise out there for founders. (#29)
It’s easy to get overwhelmed by the number and voracity of opinions and recommendations shared online. When I started my first company in 1996, the Internet barely existed. It was difficult to connect, find mentors, and read a ton of “best practices” or “how-tos” online.
Today we have the opposite problem. For everyone that says, “Go left!” there are an equal number of people that say, “Run to the right!” Early stage founders are left spinning in circles, which is completely understandable.
At the end of the day, if you’re a founder, you run your company. You make all (or most) of the decisions (especially at the early stages.) You have to figure out what problem to solve, which customer to serve, what to build, how to go to market, raise capital, hire people, build a culture, and so on. If you have a Board of Directors they also have a say, but ultimately, it’s all on you.
With that in mind, I’m going to do exactly what I just warned you against—I’ll share my viewpoint on common misconceptions I’ve seen with early stage founders, adding to the endless, chaotic swirl of startup advice. Hopefully with a bit of focus too. 😊
1. You need to build a platform
Platforms are cool, but they suffer from the challenge of being too horizontal. The AI craze is exacerbating this. Tons of startups are building broadly focused AI platforms in an attempt to capture the hype. How many startups today are focused on AI for building websites? Or AI for aggregating all your data? Or AI for enterprise search? Etc.
Here’s the challenge: You might believe you’re differentiated in the market, but your customers can’t figure it out. They’re not AI experts. They don’t know the “subtle” difference between which LLM you’re using or how your technology does X, Y or Z super duper thing. “You’ve seen 1 AI tool, you’ve seen ‘em all” is going to quickly become the prevailing feeling amongst customers.
Horizontal platforms leave the use case up to the imagination.
In some cases it works. Bubble (a no-code platform tool) has seen tons of success getting people to build new software applications. The company has raised $100M+ (not that the amount raised equals success, but still that’s a lot of dough.) Bubble doesn’t tell you what to build, it gives you the tools to build what you want. That means you need a use case before you can use it.
Unfortunately, platforms struggle when users don’t have an immediate or painful enough use case, or can’t figure out how to use a generic platform designed to do “all the things.” Going to prospective customers and saying, “You can use it for this, and this, and this, and this!” isn’t helpful.
It’s tough to be the world’s greatest platform that [helps with a high-level broad thing.]
It’s easier to be the world’s greatest [product that solves a specific use case.]
You don’t need to build a platform at the outset. Typically I discourage it, and prefer to find very specific use cases (leaning into specific verticals or industries) where you can really understand the need, the user/customer and dominate. Use cases help people understand what you’re doing and why. Use cases help people figure out if you’re right for them versus all the other “generic platform tools.”
2. You need to go after a big market
Initially, I don’t believe this is true. Similar to the argument above, when you chase a big, generic market you run the risk of being washed out by the noise. Claiming you’ll get 1% of a giant market is a mistake—don’t do that.
I prefer niche markets that you can really go deep on, learn from and take a big chunk out of. Then you can expand up market or go sideways into another market. I’m not suggesting doing this is easy, but it’s easier than going after the biggest market possible and pretending you can win. By the way, you can also go after a smallish market and grow it.
I’ve written about this before:
A few important things to note:
VCs want big markets. Some will be comfortable going after a niche first, but most get nervous. They need to see a pathway to you winning BIG. Of course most startups don’t—even when they start out claiming they’re going to gain significant market share in a giant market—but VCs are gonna do what they’re gonna do. (Note: I invest in startups through a venture studio, where we build companies with founders, and I’m quite comfortable attacking smaller markets if I see the potential to win quickly, and expand from there.)
It is possible to go after too small a market. I wish it was easy to tell you exactly what market size is reasonable as a niche, not too big and not too small (think: a Goldilocks market), but it’s tough to pinpoint. If your target market is sub $1B that’s probably too tiny. Anything over $50-$100B is probably too big to really wrap your head around. It also comes down to how you define the market, which is more important than nailing the right size. Early on I’d much rather you have real clarity on the user/customer than confidence about defining a specific market.
Small markets should not equal small vision. By all means go after a small market, but don’t do it with a small vision.
3. More features = More usage & sales
It would be amazing if every time you added a new feature you increased usage (and retention) of your product and increased sales.
Honestly, it’d be amazing if that happened for every 10th feature you added. Just imagine all of the features built in every piece of software that do almost nothing valuable for users/customers.
A study by Pendo found that 80% of features in the average software product are rarely or never used. To be fair, some features aren’t meant to be used often, but still, this should make people realize that stuffing more functionality into your product isn’t the answer.
Instead of focusing on adding more features, figure out what really makes your product tick and get that right.
4. Product-Led Growth is the answer to everything
Product-Led Growth (PLG) is a strategy for using your product to drive customer acquisition, activation, retention and expansion. The product is at the center of everything. It sounds like an awesome way of doing things, and it certainly can be, but it’s not always the right way to go. I’m not a fan of the “all or nothing” mentality that takes over around concepts such as PLG.
“If you’re not doing PLG, you’re going to fail.”
Nope, that’s not true.
Salespeople have sold more software than products have sold themselves. OK, I didn’t fact check that, but I’m fairly certain it’s true.
You should absolutely understand how PLG works and figure out if it’s right for you, or if some version of it is suitable for what you’re doing, but don’t assume it’s the only way to do things, or that there’s a perfect playbook you can follow to win.
Here are some great PLG resources (despite the misconception that you must do PLG):
5. You can copy competitors’ pricing, because they tested it first
I’m going to expand on this because I see a lot of early stage founders copying a lot of what others are doing, expecting it to work. In some cases it does! But it’s not a great strategy. You don’t know how other companies are making decisions. You’re not in their board rooms. You don’t know if what they’re doing is based on any legitimate research/validation or just the CEO’s gut.
Do your own homework.
You need to figure out what to build, for whom, and what to charge. By all means use competitors as inspiration, but copying them flat out and expecting that to work is trouble.
6. If you build it, they will come
When I asked on Twitter for some of the biggest misconceptions held by early stage founders this was mentioned a few times. Honestly, I was somewhat surprised. Do people still believe they can build a “great” product and it will magically attract users/customers?
This isn’t Field of Dreams. (If you don’t get the reference, you’ll have to look it up.)
The easier it gets for people to build software products (via no code tools, AI, cloud infrastructure, etc.), the harder it is to stand out from the crowd.
In Lean Analytics, Alistair and I wrote:
Don’t sell what you can make.
Make what you can sell.
The point is this:
Making stuff is usually pretty easy.
Just because you can make something, doesn’t mean you should.
Making something first and then trying to sell it is ass-backwards.
Instead, figure out what people want/need and if they’ll buy it, and then make that.
7. Design partners = Product-Market Fit
I don’t know when the term “design partner” became popular, but it’s taken over. You can’t meet a B2B startup that doesn’t highlight their design partners. Aren’t these beta customers? Or pilot customers? Isn’t that what you’re gunning for at least?
Side note: I asked this question on Twitter. Brandon Waselnuk suggested it was a blog post by a16z, A Framework for Finding a Design Partner, that really opened up the floodgates. There’s some interesting debate in the Twitter thread about design partner vs. beta customer vs. pilot customer.
When markets were frothy, founders declared product-market fit with a handful of design partners. Ugh.
In a lot of cases, design partners aren’t paying. One would hope that they’re actively engaged with your product and providing feedback, but if they’re not paying, you’ve got a long way to go. You haven’t even begun to nibble at the heels of product-market fit if you’re not seeing a value exchange between you and your customers; i.e. you give them a product they want/need, they give you something in return (ideally money, but this can also be data or attention, which you then use later to monetize.)
Sidebar: Raising capital is also not the same as Product-Market Fit.
It’s easy to delude yourself that an investor’s support is tantamount to winning. Your ability to convince an investor to write a cheque is not the same as building a great product that solves a real problem in a market you can access and grow into. The capital might give you some of the tools and runway to figure it out, but don’t equate fundraising with winning. It’s a means to an end.
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8. Everyone is out to steal your idea
The reality is that no one is looking to steal your idea. Why? Because they have their own ideas (and their own problems!)
Ideas are everywhere. I’m not belittling the importance of ideas (they’re great starting points) but they’re not proprietary or secret.
Building in stealth isn’t necessary. I get why people don’t want to reveal what they’re working on too soon. This should be less about someone stealing your idea and more about avoiding distractions. If you’re heads down and super focused (buy hopefully talking to users/customers!) feel free to stay in “stealth mode” from the general population. You don’t need to be on Twitter sharing every gruesome detail. You don’t need to be generating buzz. You can do both of those things, but neither is necessary for success. Stealth mode from the hustle culture startup ecosystem is fine; stealth mode from key users, customers, partners is not a good idea. (Note: You can also go the opposite and build in public. Some folks have had great success with that.)
Investors won’t sign NDAs. Founders still ask me (and other investors) for NDAs. We won’t sign them. We see too many things. I completely understand why a founder might be nervous about sharing with an investor (b/c they know the investor sees a lot—heck, the investor might be invested in a competitor and the founder doesn’t even know it), but odds are the investor is not stealing your idea.
While I don’t believe there’s rampant idea stealing taking place, I appreciate founders’ nervousness about sharing. It’s up to you to decide what you want to share and when. But at some point you will have to share, whether it’s with users, customers, potential investors, employees, partners, etc.
9. Getting media attention means you’ve made it
Most people love media attention. At least good media attention!
Your startup gets publicity and is recognized as the next hot thing.
You get praised as a genius founder with God-like instincts.
You hear the crowds cheering you on.
Many years ago, a founder came to me and said, “If we could only get more PR, we’d be set.” At the time, I think the product (which was a consumer mobile application) had ~500 or so users (most weren’t super active.) My response was, “Let’s figure out if anyone wants this thing first, before we worry about mass appeal through the media.”
PR coverage can be very helpful. But it’s dangerous to assume it means you’ve won. (h/t Darrell Lerner)
10. The job is all about fundraising
If you decide to raise funding for your startup, it’s going to be a significant part of your job. Unfortunately many founders decide to raise capital before doing anything else, and it becomes their singular focus. For some founders, raising capital is a sign they’ve “made it”—personal validation of themselves as founders and their idea. Ugh.
A CEO’s job is to keep the lights on. But that doesn’t have to be done exclusively through raising capital. And when raising capital takes precedence over validating a problem, engaging customers, building the right product, etc. you’re setting yourself up to fail.
Not every startup should raise capital.
Raising capital is not equal to winning.
Raising capital doesn’t make you a superstar.
Raising capital is an option, but don’t obsess over it.
11. Being a founder is a glamorous job
It’s not. 😂 😓 😭
More common misconceptions worth reading
As I mentioned, I crowdsourced some of these ideas via Twitter. I can’t possibly cover every misconception in one article.
Click the image below to see all of the responses. There are some great ones.
What are some common early stage founder misconceptions you’ve experienced? Share in the comments!