In the previous section we saw that the goal for a startup is to search for repeatable and scalable Busines Model, but what is a business model anyways?
Finding a Business Model
In the past, all startups were pushed to put together a Business Plan document, in order to apply for funding or support by the entrepreneurship ecosystem. This has now evolve to ask them about their Business Model Canvas and their “Elevator Pitch”. But at the end, all those tools are just ways to check if the entrepreneur has a clear understanding of their customers, the value proposition they offer to them, the resources they need to make that offer, and the income they are expecting to make money.
What we’ve found so far on the field is that many of the entrepreneurs that are still at an initial stage of their business idea, are getting bombarded with all those questions about a model that they can’t answer because they simply don’t know yet. Most of the time, we see disappointing faces and a lame pitch about something that is unreal or unproven.
The good news is that not knowing what your business model is from day zero is OK!. In Design-Thinking terms, the early stage of the design process is called the “Fuzzy Frontend“, and designers expect, and are even comfortable with not knowing what the problem or the opportunity is at first glance.
The Three Stages of a Startup
As Ash Maurya summarizes on his “Running Lean” book, a Startup goes through three distinct stages:
The acid test to know where you are standing between stages is answering the following questions:
- Product/solution fit: Do I have a problem worth solving?, Do I have a feasible solution for it? is my concept desirable for customers?
- Product/Market fit: Have I discovered and attracted my first customers? are they already paying for my product?
- Scale: have I found a repeatable business model? Do I have a plan to execute to accelerate growth?
If you can answer the questions for one stage, you can move to the next. But there is no stage 4, if you already answered all of these questions in an affirmative way, you don’t have a startup anymore, you have succeeded in this venture and you own a company now
In his famous book, The Four Steps to The Epiphany, Steve blank says:
“A startup should focus on reaching a deep understanding of customers and their problems, discovering a repeatable road map of how they buy, and building a financial model that results in profitability.”
Is there a formula to succeed?
Although there are many methods out there that mark a path to startup success, the real answer is: there is NO formula or path that you can follow to create a successful startup. Sorry, but you’re going to have to create and walk your own.
What most authors agree tough, is that on every stage of a Startup, the entrepreneurs need to iterate on a Learning loop (build-meassure-learn), and that those that manage to iterate enough times before running out of resources are the ones to succeed.
The good news is that there is a huge amount of useful information and tools that you can use to make your life easier, and that we as an entrepreneur community are here to share with each other.