5 Steps to PMF with Rob

00:25:00 · RobPlay from here

[00:25:00] S1: The niche is, is the most important thing that you can do. Figuring out in the market who your customers are and will they pay for your pay for what you're offering, what your , what your , what your services or what your software is or whatever it might be. I think that that is the most important question that you need to have answered. Uh , everything else is all crap. You , uh, af before and after that. Like, you have to have that answer.

00:25:22 · Pablo SrugoPlay from here

[00:25:22] S0: Don't kid yourself into thinking that the way to expand is to expand tam . It's not for a long time. At some point, hey, you're doing a hundred million a RR and you wanna do 200 fine. Like, that's just not my, that's not where I place . So I don't know. But you're going from one to 2 million a RI can guarantee you the right way to do it is not by, you know, going, opening up a new market, opening up a new city, opening up a new vertical. It's by doubling down and tripling down unless you actually don't have product market fit , in which case you're kind of more in this exploratory phase. That's the first point . The other one that I'll mention , Rob, is I got an email actually just today this founder's like, you know, I'm doing this thing that you said, like I did all the research, I'm going after a niche market and you know, we actually have success in this niche market. But now when I go pitch VCs, they're like, you're too small <laugh> , your market is too small, your opportunity too small, they won't fund me. You know? And I thought I was thinking about this all day, I was thinking about it and I'm like, here's my answer. My answer is I'm not, none of these are ways to get VC money. <laugh>. Like you want to go get VC money? It was, there was something I heard, oh , I don't remember when, but it was really, really interesting, which was, so many things in life can be gained . Like if you wanna do well in school, you can gain that system. Yeah. If you wanna fundraise, you can game that system. I game that system. Yeah , right? I game school and I game fundraising because you really can build a story and a deck and a presentation, all these other things to make you better at fundraising and to actually get dollars in the door . You can't gain product market fit. You either actually get it or you don't. And that's what makes it so hard. And so all these things, if you focus on a niche market, it may turn out that your market's too small. It may turn out you're not fundable or that VCs won't see the opportunity, but at least you get product market fit. The flip side is you focus on fundraising, you gain the system, you get VC dollars, but if you don't get the product market fit, it's all for Naugh, right? So, so that's kind of my, my take on that , on that, that answer. Well ,

00:27:12 · RobPlay from here

[00:27:12] S1: You know, I , it's, it summarize like I was thinking about it . Product market fit is hard to find. It's very hard to find , uh, like you really have to, there's a lot of maneuvering , uh, to determine true product market fit. But it's really easy to give up on finding, like, you can get really lazy with product market fit where you say like, oh, I got it , I got a good enough and , and I've been in businesses where , uh, like I come into the business and that business is in seven or eight markets and flailing like different cities and uh, and haven't found product market fit. And it's all over the place. And, and the only logical thing to do is, is pull back to one city to figure it out before you expand with the , with the proper playbook. But, but it's really easy to , to trick yourself into thinking that you've got

00:27:59 · Pablo SrugoPlay from here

[00:27:59] S0: It. So let me jump to to the next one, find value, not growth. The idea of being here, I think in the early days, because here's the thing, like every founder wants to grow. Like that's just, that's the whole point, right? You wanna get, you wanna get big, you wanna get to a hundred million a r and beyond. But interestingly, what I found is, like in the early days, obsessing overgrowth, and I mean specifically before product market fit, thinking about growth and obsessing over it and making it like a KPI is meaningless, right? Like financial forecasts before PMF are meaningless. Um, and there's a few errors that come out of that. I'll give you two very concrete examples that I've dealt with really recently. The first one is take a company that's growing that's got like 30 K or so in MRR , right? Kind of still getting traction obviously, but still not true product market fit. What a company like this that's focused on growth is gonna do is they're gonna look at how much they've been growing over the last few months. And what they realize is a growing 10% month over month. And so they think 10% month over month, if you extrapolate, that means you're tripling, right? Which means you start focusing on how you're gonna go from 300 k to a million in a RR 330 KMRR, let's say to a hundred k in MRR in a year. The reality is a lot of these companies are not growing at a rate, they're actually growing linearly. So what this company's actually doing is it's growing $3,000 per month, but for them 3000 on 30 k, it looks like 10% MRR because you're not focused on actually delivering value in a true product market fit . You miss this and you start to extrapolate it out. And I've seen this play out to the point that companies like this will go on to raise meaningful dollars because they could tell this story and now they're sitting on this huge prep stack because they've raised all this money, they never delivered meaningful value, they never actually delivered true product market fit. They were never growing compound. Which by the way, that I would say is a great sign of product market fit if you're actually compounding at whatever rate, but probably, you know, you're doubling, that's a sign that you actually have product market fit because the market's actually pulling you when you're growing linearly.

00:29:58 · Pablo SrugoPlay from here

That's a sign that, that maybe your market's small but more likely that you're pushing exactly. And that you don't have that sort of market pull. And, and trying to understand that is really important, but it gets solved if you're not even focused on growth. If you're focused on value in those early days. That's the first thing. And then the second thing, actually, I just had this because you know, we're end of the year, people are forecasting next year, and I had this one company who's at like a million in a RR and they were trying to forecast next year, and they're like, you know, the forecast to hit like 3 million in a RR and then, you know, you forecast all your leads and you forecast all these things. And, and when we looked and I , I, you know, said, look , look , let's look at 2023. Let's actually analyze the business. We realize there's actually no engines. Like there is nothing proven, there's nothing you can dial up. I said to him, did you for example try to dial up inbound leads this year and see if that worked ? No, I haven't. I just, I've gone, what? I've gone, okay, so you actually, in order to hit three x, you need to three x your inbound leads, but you have not tested anything that actually does that. You therefore have no way of knowing whether you can do that, which means it's all effectively garbage, right? The other one was on outbound sales . This often happens, it's like, you know , you've gone there with the , the one or two people that you have, have you hired someone and trained them? Well, I did it once this year. Okay, so your sales leader is still selling and they had to hire and onboard one person, but now you gotta do it four times over. Do you have an idea of what it actually takes to onboard? Do you have an idea of what success rate you're gonna, you don't. So my point is, when you focus on growth before you have true value, you're making things up because you haven't figured out any of the engines that actually drive growth, that make growth a meaningful KPI after product market fit

00:31:44 · Rob, Pablo SrugoPlay from here

[00:31:44] S1: Way to crush that guy's spirit 100%. He's down in the dumps. Now he is like, well , he's , he's [00:31:48] S0: At , but I , I said, look, I said, look, forecasting works, do this. Figure out if you just keep growing at your rate, at your rate of not rate of growth at you added a million a hour last year, let's assume you add one more million this year and just figure out what your runway is because that's gonna help you sleep at night to understand what your runway is. It's really important as a founder, what I'm not so interested in is you trying to predict 12 months out what revenue's gonna be. Who cares? Let's just do it quarter by quarter . What do we need to test this quarter to see if it improves inbound leads to see if it improves conversion, to see if it imp improves outbound, whatever. And if it works, great, we double down and if it doesn't, it doesn't, the next quarter we try it something new versus trying to say, this is where I'm gonna be a year from now. Like, public companies have trouble with this. Like for sure if you're at a millennia or you have not ,