Startup equals growth. Y Combinator founder Paul Graham
coined this phrase.
He went on to say that ‘for a company to grow really big, it must (a) make something lots of people want, and (b) reach and serve all those people. Most businesses are constrained by one of those two items. If your business is not constrained by (a) or (b) then you’re in startup territory.’
There is are two important nuances that live within Paul’s philosophy, both of which relate to making something that lots of people want.
Making something that lots of people want is a process that takes time and experimentation. A switch doesn’t get flicked to reveal the thing that lots of people want. It takes the compounding effect of being in market for ten years, a high calibre dedicated team and luck to make something that lots of people want.
However, there are clues to short circuit the journey. Y Combinator, for example, has developed a reputation for backing founders who have built products that have a disproportionately large number of fanatical lovers of their product soon after the company is founded. I wrote about how to focus on those people recently.
The second nuance is more deceptive to founders. And it has to do with the difference between fixing a problem and solving a need.
Most founders become founders because they see an opportunity hiding in plain sight. Those opportunities are usually rooted in problematic experiences and here’s the punchline:
Fixing a problem is not the same as meeting a need.
Fixing a problem usually helps a specific group of people to resolve a frustration.
Meeting a need results in the creation of a magnetic attraction between user and product and an aspiration for others to engage.
And this issue usually doesn’t reveal itself In the early days of a venture. This is because the founder isn’t far enough into the journey to have evidence of meeting a need and the magnetic attraction that follows. The other alternative is that their excitement for the idea is so great that they won’t let themselves see the difference.
In any case, the early days of a venture see founders trying to find evidence from desk research to support their thesis that the market potential for their idea is massive.
Calculating that rate takes founders from vague top-down opportunity analysis to part (b) of Paul Graham’s philosophy, how to reach and serve all those people.
While this can also be solved with time and growth-focused experimentation, asking whether a venture will scale is actually asking how many team members will it take to reach and serve all those people. In other words, how many users and paying customers can one person serve?