December 17th, 2012

Stages Five, Six, and Seven of Founding a Company: Committing, Minimal Viable Product, and User Traction

In my last post, “stage four of founding a company,” I discussed the “re-thinking” phase where founders must be able to confront their “first brush with failure.” At this point, if you feel like the prototype you have built works, and the user experience and technical risks are all looking good, then you’re ready to commit (stage 5) and then build a minimally viable product (stage 6).


I’ve seen one major trend in this phase: the founders that think about product distribution before building their MVP are much more likely to succeed than those that don’t. You have to understand how your product will be distributed because that will fundamentally change how you architect it. When you commit capital and resources to building a MVP product, you are shortening your runway. Every start-up has a limited runway, regardless of how much it has raised. Considering this point, every start-up may as well maximize the opportunities of the product gaining traction, before the inevitable pivot to another idea. 


To make the most of that limited runway, every founder must think hard about how their product will gain traction or distribution. Traction can come from a variety of sources: it may come from the uniqueness of the product itself, a business partnership, a social strategy, a platform specific strategy; whatever it is, think about it before committing to building that minimally viable product, because this will determine the strategy around which you building your product.


This post is really for those founders that have committed to building their product and but have not yet started.


The MVP Product Phase


From my experiences, the most important quality of a founder is the ability to think big and act small. Architect a big product — but deliver a small one, and add later. These founders will make small hacks on their product to increase functionality. Some hacks are awful and will actually hurt the product. If you design elegantly and small, while continuing to think big, you will get a MVP product with some runway left for you next stage. Instagram is a great example. It started small as a simple photo app. Later, it added more filters, integrated with Twitter and Facebook, all of which helped it grow tremendously.


This stage is for technical founders to feel like they are in their “zone” while creating their MVP. It’s also a difficult stage. Before the runway is out, a founder must juggle features and resources, while leaving enough time to gets users excited and measurable traction to build. Once that runway ends, things better have taken off.  

Sounds simple, but I’ve seen way too many founders struggle with decisions during this phase and it’s not all that simple. Facebook had a minimal mobile product for years. Turned out it wasn’t viable. Google hangouts is a very viable product, but it’s not minimal enough. These are just two examples from very successful companies with very technical founders that both miss the mark of MVP. Instagram on the other hand is an epic success as a MVP. Juggling the hacks with time make an MVP.


Product Traction - The Final Stage 


If you have a big hit like Instagram or Draw Something, you don’t have to worry about traction, but 99% of founders won’t have those hits. Twenty percent of founders will have a great product, but how do they know if they have traction?


Product traction is measureable. It should be based on the distribution strategy you’ve picked or a lucky one you’ve discovered. It’s important to incorporate qualitative user feedback like product reviews. Remember this: beware of false product traction. It’s easy to recognize no traction: your app is downloaded only five times a day. This is not good. The distinction blurs when you are spending 10K on buying incentivized installs, but only seeing 1k downloads a day? Is that traction? Hmm…What if your app goes viral for a week and then drops precipitously in the charts? Is that traction? Most of the founders I work with find these to be hard questions.


The best measure I’ve seen is engagement. If users engage deeply with your product—you are set. Engagement means that for a certain section of the audience the product satisfies a deep need. The potential market might be small or big, you won’t know. If you satisfy a deep need, even for a small niche, then at least you have a product and a market. Consider the cell phone. When it was first introduced it was a very small niche for stockbrokers only. With time it satisfied a deep need to communicate in real time, even though call quality sucked. This is traction.