Great Ideas Come From An Inflection Point In Technology

Andy Rachleff was a big hedge fund guy that helped start Benchmark Capital. If you’re in the startup scene, Benchmark Capital will not mean a lot to you. But Benchmark went on to fund Uber, Snap, eBay, Juniper Networks, and many more. I felt compelled to write this post after I listened to the podcast. In fact, I listened twice. He said something that I found very interesting. He was talking about startups and positioning and how most people do things backward. Most people sit around and look at an industry and try to find the holes or the problems in that industry and then build solutions around that. Andy says, “Great ideas come from an inflection point in technology.”

He says, “You should start with the technology or the product and then figure out people or industries or markets that need it. That crave it.” Once you think you found the market, he says, “Start with and define the value hypothesis before you define the growth hypothesis.

Three questions: What, Who, and How?

So what is a value hypothesis? Three questions: What, who, and how? So what are you going to build? Who is desperate for it? How will it be delivered? In other words, what is the business model? There are two key tests you may want to put your business through in order to ensure the greatest potential outcome of success. What are the value hypothesis and the growth hypothesis?

The value hypothesis tests how much value the product brings to customers. For example, if the function of a product is antiquated, the value of that product is diminished. This test should be performed early in the stages of the development of your business model.

The growth hypothesis tests how your customers find your product. These are your distribution channels and in some cases your advertising channels. This test should be performed frequently. Be sure to perform this test only after your value hypothesis.

Most people think to pivot or iterate on the product, not the market. So they say, “This is the market. We’re going into this market. But the product’s just not right. Keep iterating and pivoting on the product, the product, the product.” He says, “That is wrong. Stick with the product, stick with the technology. Find a different market until you find a fit.”

Pivot On The Market: Make Your Big Bang

Now that I look back on that, one company that I did sell, when we started it, we only focused on the technology and we fell into the market. Which at that time were restaurants and bars that then expanded into salons. But when we were first developing it, we just focused on the technology. So we must’ve got that right by mistake.

He goes on to say that the number one question when you’re talking product market fit is this question. “What do you uniquely offer? What do you uniquely offer that people are desperate for? And if people are not desperate for it, it will not be or it will not have a big bang.”

I mainly wrote this post for myself so I can look back and stay focused on this and on some of the new projects we are working on. I will keep you guys posted on how it goes.