Why getting funding will prevent you from staying small and finding product market fit

Why getting funding will prevent you from staying small and finding product market fit

I've been working with a small swiss startup in recent months as a growth and marketing consultant. The company has recently raised a seed round and has started to hire. It's important to note that they haven't found product-market fit yet. Recently, we did a workshop to discuss future marketing strategies and it has been really interesting to see how raising funds has changed their approach to building a company.

Having investors means you need a 1B market

This is the first key learning I'm taking with me from working with a venture backed startup. At Nat for example, we're trying to find our ideal users and early adopters by going more and more narrow. From independant professionals to independant consultants that use Gmail and communicate mainly through email. Unfortunately, this isn't a one billion market but it's a clear market segment of people who experience the pain we solve.

When I suggested the same approach during a workshop, it became clear to me that this was not possible because we needed a market that was big enough to sound exciting during the next board meeting. They instead chose to opt for a general solution without any sort of niche. The downside of this approach is that you end up appealing to no-one. Especially in early days, you'll struggle to get users and one of the best hacks to still find customers is to be the perfect solution just for them.

For example, I'm looking for a new accounting tool and won't get excited by "the best accounting tool for entrepreneurs" but might give "the best accounting tool for UK-based saas businesses" a try.

Iterate instead of doing everything at once

The solution that was chosen was to have a general branding and mulitple sub-niches. For example, we would say we're a CRM app, and then, depending on who you are, we'll tell you that we're a CRM app for startup founders, for consultants or for investors. I'm not sure this works. Even if you don't put anyone off, you won't get anyone excited initially, and you can't really build your app for tons of different niches at the same time.

The alternative I would suggest, which we're giving a try at Nat.app, is to pick a niche, give it a go, go all in for some time and switch if it does not work out.

Don't take investments

The more I spend time in the software world, the more I'm convinced that VC money is not right. We really don't need money to survive. There are tons of startup offers and plans to cut your costs down to the bare minimum. Then, the most challenging part of building a software business is figuring out a niche of people who have a problem that you can solve. This does not require money at all. Only time and perseverance.

Finally, the risk that you've been working on nothing is big. If that's the case, then you'll have to stop everything and close shop. In that case, you really want to have as little assets and liabilities as possible to be able to move on. Having an office, a team, a board of investors and more just won't do it.

Taking it slow is not bad.

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