Waves of demand
Why some startups grow fast
Why do some startups grow really fast?
In part, it’s because they move fast and work hard. But there are plenty of startups that move fast and work hard that don’t grow really fast.
I’ve found that most of the writing on this topic is… less than useless. “Find a big, underserved problem!” “Listen to customers!” “Something about Henry Ford!” “Live in the future and build what’s missing!” Cool, thanks.
Two things that actually have been useful in my journey:
A clear definition of demand
The idea of “waves of demand”
What actually is demand?
I’ve written a lot about this, but as a quick recap:
Demand is found at the individual buyer level
Everybody has a mental Trello board, a million things they want to do… but at any one point in time, they can only do ONE project
Demand = the project on their critical path. If our product fits better than their alternatives (e.g., DIY, hiring someone, etc), they buy.
If we understand WHEN the project is on someone’s critical path, and talk to them at that moment, they pull - we don’t push.
The demand model works at the “n of 1” level - one real person. Which is crucial, because if it doesn’t work at the “n of 1” level, it can’t possibly work at scale. (Read that sentence again - it’s the core reason startups build things nobody buys.)
Waves of demand
Imagine the government creates a new regulation, effective immediately, for all businesses. This creates a tidal wave of demand that hits everyone right now: Everybody has a new project on their critical path, to comply with the regulation.
Imagine, instead, that on everyone’s 33rd birthday, the government sends us a box with a live (and very angry) porcupine in it. We instantly have a new critical-path project - dealing with our angry porcupine. Unlike the regulation example, this is a wave of demand that hits the economy unevenly, because people turn 33 at different points in time.
Most of the time, waves of demand don’t break like these two examples. Take, for example, products that serve companies building AI agents. Not every company is building an AI agent, and not all AI agents are at the same stage of development. Companies that are the farthest along building AI agents are running into new projects that nobody has dealt with before; the rest of the AI agent world will, probably, eventually follow along.
With the concept of waves of demand, quotes like, “Live in the future and build what’s missing,” start to make sense. It’s just a fancy way to say, “look for new projects that are emerging on people’s to-do lists… that are likely to emerge on more peoples’ to-do lists later.”
It also is a more realistic way to think about market size: A company’s addressable market is simply the number of people who have this project on their critical path right now. Markets grow as waves put the project on others’ critical paths.
If we can visualize demand a wave of projects hitting individuals’ critical paths, we can then see why some companies grow super fast and others don’t. Effort and execution aside, the wave of demand dictates a startup’s growth rate.
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PS:
As someone who does professional customer discovery and PMF--never underestimate demographic waves, especially enormous ones like that of Gen Y (and secondly, the Boomers). In a sense these are like "you will receive a porcupine sometime in the next five years"...but in the meantime you are living in a society full of people who opened their porcupine box already.
In my mid-fifties, I'm old enough finally to see that history does indeed rhyme. The issues the Millennials are facing today are very similar to the ones that Boomers faced in the early 80s--first real jobs, deep-seated dissent at really learning the differences between reality and what they'd expected as young adults, thinking about houses and kids. It's a mindset, with the proviso that people in the mindset are often the last to see the banal bits, and the banal bits end up being "what it's like."
Amazing… I am wondering if one can do an animated start up series about building a startup. And it should be in Japenese