Startups unfold

The surprising process by which startups come to life

Nearly every startup success story goes like this:

1. We did a bunch of research, discovery, and analysis

2. Then we got punched in the face for a few years

3. We observed something odd and, on a whim, tried something different

4. We started getting traction, finally

5. As we got traction, problems emerged, and as we solved them, our business came together

(Most failure stories end at Step 2.)

Is this path normal? Yes.

Is it necessary? No.

Most startup pain is avoidable. It’s caused by common beliefs about startups, including:

• You can “validate” an idea in advance through research and discovery.

• You can experiment your way to product-market fit.

• When you’re on the path to product-market fit, you’ll know: Your experiments will either generate pull or they won’t.

• You need a big vision and a big market size from day 1.

• If you don’t raise money, you’re not serious about building a big company.

• You’re either building product or selling it.

• You nail it, then you scale it.

These beliefs prevent you from finding product-market fit. They sound right, but reflect a total lack of understanding about how businesses come to life.

Here is the process, to the best of my knowledge. It is sourced from my firsthand experience as a founder and working with founders who are in the pain cave. (Not from post-success retcons.)

The unfolding process

To build a startup, you:

1. Sell & deliver something

2. In the process of trying to sell & deliver it, you learn that it is not quite right, for reasons you couldn’t have known in advance.

3. To respond to this challenge, you change something about what / how you’re selling & delivering. You might adjust your target market, your messaging, your pricing, etc.

4. You realize that, in changing this one thing, what you’re selling & delivering doesn’t make sense as a whole anymore. To make it all coherent, you change other things.

This is the unfolding process. It is how you get from something that kinda works to something that really works. And it’s why the thing that really works rarely resembles the thing you started with.

Let’s give an example of the unfolding process, shall we? Here’s one unfolding from my founding experience:

1. We sold & delivered a hiring tool to fast food restaurants

2. As I onboarded customers, they would say, “I don’t want to pay to hire NEW employees. I want to pay to retain the employees I already have!”

3. In response, I built & launched a very simple employee retention feature.

4. Selling a hiring tool & a retention feature didn’t make sense in our customers’ minds; we had to change our pricing, positioning, messaging, business case, etc. to make everything coherent to them.

Not all unfolding processes are this dramatic. It might be something closer to this, from a friend’s company:

1. We sold & delivered a tool for recruiters that helped them find qualified candidates faster using AI.

2. As we onboarded recruiters, we found they churned a lot because they expected us to find the perfect candidates for them… which was hard, because they couldn’t really describe exactly what they wanted in one go.

3. So we re-designed our product delivery approach to focus on multiple feedback cycles to get to the “right” candidates.

4. When this happened, we realized that the way we described and priced our product and rollout process set the expectation that we would deliver perfect candidates immediately… which wasn’t coherent. So we adjusted these things to make everything coherent.

Most startups are multiple unfoldings away from product-market fit. My first startup took ~10+ unfoldings, and wound up in a very different place than where we started. See 6 unfoldings below:

Unfolding implications

Startups come to life through this unfolding process.

Unfortunately, everything in the startup world is designed to prevent unfolding from happening.

A few examples:

• “Research, discovery, & validation” prevents unfolding. Unfolding happens in response to real problems as you sell & serve, it doesn’t happen in theory.

• “Experimentation” prevents unfolding. It assumes that you can know what to test without selling & serving, that you can know the business implications of your test results, and basically that you can unfold the business on a whiteboard, etc.

When you understand unfolding, a lot of startup BS goes away.

Here’s a non-exhaustive list of things you realize when you understand unfolding:

• You can’t know your market size in advance, because you can’t know where the unfolding process will take you.

• Do direct sales & directly serve customers for as long as possible, so you don't have to approach unfolding from secondhand knowledge. Never lose touch with customers.

• Build the simplest product possible to leave space for unfolding, vs. having to refactor everything.

• Start the unfolding process ASAP. You are an unknowable number of unfoldings away from a real business. Everything else is LARPing.

• Unfolding explains why large businesses calcify: Founders move away from the unfolding process, they split up the customer journey so nobody has a line of sight to the full success story, and bureaucrats / idiots / MBAs try to approach things logically vs. from the unfolding process.

The main implication of the unfolding process is: Focus on selling & serving. Just repeat your current customer success story. Occasionally, take time to zoom out & see where the system isn’t working. Make changes and ask, “given this, how do we make the whole customer success story coherent again?”

The hardest part of the unfolding process is letting go. Realizing you don’t, and can’t, know where unfolding will take you. It is terrifying, liberating, and oddly religious.

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PS - the waitlist for PMF4 just dropped.