The bus you didn't see coming
What can you *really* know in advance?
I asked Jason Cohen, the founder of unicorn WP Engine, “When you started WP Engine, did you have long-term plans for it to become a massive venture-backed company?”
Jason’s answer:
In my case, the explicit goal of WP Engine on Day 1 was in an email from me to Joshua Baer saying: “I think this can get to a $30k/mo bottom-line profit run-rate, and that will fuel the next thing we want to work on.”
It turned out to be much bigger/better, so we changed the goal… about 15 months later!
I hear this kind of thing very, very often.
So ask yourself: How much do you need to know in advance (ex-ante)? How much can you know ex-ante?
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We founders tend to overestimate what we know. More fatal: We tend to overestimate what is knowable ex-ante.
There are infinite potential variables why a startup could succeed or fail. You can’t possibly know them all in advance, or which variables are the important ones. (Simply: You tend to get run over by the bus you didn’t see coming.)
Smart founders overthink the early stage, and it’s largely due to the belief that it’s possible to know the right things ex-ante. We believe that the right answer, the big TAM, the global optimum will just reveal itself if we keep analyzing, envisioning, researching.
This is the underlying theory powering the “minimum viable product / test” breed of startup wisdom. You’re supposed to sequentially test the most risky assumptions about your business, and voila! Startup success!
Like many things, this makes logical sense in theory but falls down in the messy real world.
How do I know this, aside from tons of anecdotes from founders like Jason Cohen? The definitive article on minimum viable testing (linked here) uses Maven as a case study, and the super smart, super accomplished founder fails to identify the TRUE riskiest part of Maven’s business. (Bonus points: Reply with the TRUE riskiest part of Maven’s business.) Nothing against the author & founder, of course! Just a statement about how hard it is to know what’s important ex-ante.
Assorted implications:
It’s really hard to know your market size ex-ante. (Bad early-stage VCs focus on market size, good early-stage VCs focus on founder ambition for figuring out a venture-scale business.)
Just go find unique ways to sell & serve customers, and you will figure things out along the way. (Usually through crises + pain, occasionally through “aha” moments.)
When you DO know something in practice (e.g., you have a certain kind of customer who loves you) - double down on it. You will bias towards imagining theoretically greener grass elsewhere, worrying about the color of the grass in 3 years, picturing what the landscape will look like at $100M ARR… all distractions.
I’m not saying you should avoid deep thinking & planning altogether. But if you read this newsletter, you’re the kind of founder who will still overthink & excessively plan EVEN AFTER reading this.
Stay paranoid. There’s always a bus coming.
Rob
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PS - info on PMF Camp 3 is coming soon. Ish’s review from PMF Camp 2:
PMF Camp has been the most valuable resource that I've found in the last decade of my journey as a product builder and founder. And I've seen a lot! From reading every PG essay and business book I could get my hands on to going through YC's 12-week accelerator program. This was 10x more valuable. What I really loved about PMF Camp is that it teaches you 'how to sell when you don't know exactly what to sell yet?' This is such an important topic and almost no one teaches you how to do this. If I had gone through PMF Camp with my previous company, I would have probably saved ~$1M in R&D costs and two years of my life.