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#397: Two Questions Every Entrepreneur Should Answer

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Nov 25, 2019

Mike Maples, Jr. is a seasoned investor known for backing early-stage companies like Twitter and Lyft, while Andy Rachleff is the co-founder of Wealthfront and the mastermind behind 'product-market fit.' They dive into the critical questions every entrepreneur must answer to ensure success. The duo discusses how to identify product-market fit, the importance of customer feedback, and learnings from industry giants. With an emphasis on adaptability and innovation, they reveal strategies for navigating the challenging startup landscape.

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INSIGHT

Product-Market Fit Definition

Product-market fit, coined by Andy Rachleff, means proving your value hypothesis.
This involves defining what you build, for whom, and the business model.

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ADVICE

Measuring Product-Market Fit

Measure product-market fit using heuristics like exponential organic growth and Net Promoter Score (NPS) for consumer products.
For enterprise, use sales yield (contribution margin/sales team cost) and Doug Leone's 30-day trial method.

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ANECDOTE

Facebook's Negative NPS

Facebook had a negative NPS even during peak growth, showing NPS isn't always perfect.
Shamath Palihapitiya revealed this, highlighting the importance of multiple metrics.

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Exploring Product-Market Fit for Entrepreneurs

03:47 • 3min

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Mastering Product Market Fit

07:09 • 20min

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Navigating Entrepreneurial Pivots

26:53 • 23min

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Exploring Unique Insights and the Timing of Innovation

49:30 • 2min

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Exciting Offers and Personal Favorites

51:21 • 5min

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Crossing the Chasm

Geoffrey Moore

In 'Crossing the Chasm', Geoffrey A. Moore explores the Technology Adoption Life Cycle, which includes innovators, early adopters, early majority, late majority, and laggards. He highlights the significant gap or 'chasm' between early adopters and the early majority, where early adopters are willing to sacrifice for the advantage of being first, while the early majority waits for evidence of productivity improvements. The book provides strategies for narrowing this chasm, including choosing a target market, understanding the whole product concept, positioning the product, building a marketing strategy, and selecting the most appropriate distribution channels and pricing. The third edition includes new examples, strategies for digital marketing, and connections to Moore's subsequent works like 'Inside the Tornado'.

Four Steps to the Epiphany

Steve Blank

The Four Steps to the Epiphany by Steve Blank is a comprehensive guide for entrepreneurs, focusing on the customer development process rather than the traditional product development model. The book highlights the importance of understanding the market environment and customer needs before developing a product. It outlines four key steps: customer discovery, customer validation, customer creation, and company building. Blank argues that startups must learn and adapt continuously, unlike large companies which have established customer bases and market knowledge. The book provides insights from failed startups to illustrate the critical aspects of achieving and sustaining success in the entrepreneurial journey.

"If the customer doesn't scream, you don't have product-market fit." — Andy Rachleff

Welcome to another episode of The Tim Ferriss Show. This time, we have a slightly different episode—a takeover by Mike Maples, Jr.

Mike Maples, Jr. (@m2jr) and his firm, Floodgate, have invested in and supported many of the startups you might recognize — including Twitter, Twitch, Lyft, Chegg, and Okta, among others — long before they were household names. He's been on the Forbes Midas List eight times in the last decade, but he's much more than a successful investor. Mike has also succeeded as both a founder and operating executive.

He's also simply a great guy and the first person who really taught me how to angel invest. For more on that background, listen to my interview with Mike at tim.blog/mikemaples.

In this episode, however, Mike speaks with Andy Rachleff (@arachleff), co-founder of Wealthfront and Benchmark Capital, about two of the biggest questions that should be on every start-up founder's mind: How do you reach "product-market fit" (a term that Andy coined), and how do they know when you've achieved it?

Andy has known many of the start-up world's giants and synthesized their lessons, so you will also hear what Andy learned from Don Valentine of Sequoia, Scott Cook of Intuit, Reed Hastings of Netflix, Geoffrey Moore, Clay Christensen, Eric Ries, and Steve Blank.

The audio from this conversation is from the premiere episode of Mike's brand-new podcast, Starting Greatness, which I encourage you check out. There are some incredible guests coming.

So, if you like this conversation between Mike and Andy, be sure to subscribe to Starting Greatness on Apple Podcasts, Spotify, Overcast, or wherever you get your podcasts. You can also check out the website at greatness.floodgate.com, and on Twitter you can follow Mike at @m2jr and Andy at @arachleff.

Please enjoy!

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