Todd Jackson: belief

Transcript context

…Yeah. So like I said, you're pre-seed less than 10 people. Probably, your demand source at this stage is mostly people you know. It's friends and family, it's your network, maybe it's VCs. You haven't probably done a lot of cold outreach at this point, and it's hard to find customers. You're trying to get three to five. It probably takes you 20 warm intros to get one, something along those lines. So maybe to get to three to five, it's at least 50 conversations. That's very normal at this stage because you're just trying to find the right problem and find customers who have it. You're probably in the $0 to 500K ARR, somewhere in that zone. I would say that you're at level one. And then there are metrics to track efficiency, things like burn multiple, gross margin, NRR all of these things. All of them are just not applicable at this stage. It's too early and you shouldn't be worrying about that stuff. And so you want to be feeling this sense of progress that there are customers who need what you are building and the thing you're building works. And so conversely, the signs that we see a lot of founders get stuck, and this is a very common level to get stuck. And so if you're hanging out here for six months, nine months, 12 months, and there's yellow flags that are appearing, you're starting to feel stuck. And so the yellow flags are something like, let's say, your product disappeared overnight, your customers wouldn't be super disappointed. Let's say you have a handful of happy customers. Let's say you've got four or five customers, but the most important feature is actually different for each one of them. That starts to look a little bit more like a consulting business than a product business. Or it just feels incredibly hard to find the marginal customer, the next new customer. Or your usage is low. The product is in their hands, but the usage is low, it's not growing that much. It lasts for six months. And I think, there's a really good example, Jack Altman, who's the founder of Lattice, he founded Lattice in 2015. We've talked to him a bunch on the First Round Paths to Product-Market Fit and other things. So for those who don't know, Lattice is a people management platform, but it didn't start that way. And most people don't know about this, Lattice actually started as an OKR tool back in 2015. Oh, didn't know. Yeah. And so Jack had just seen this at other companies. He's like, "Okay, companies are doing OKRs, but they're not very good at it and it causes a lot of arguments among the executive team and employees are noncompliant. They think the whole thing's dumb. So I can fix that with software." And so the original version of Lattice was for managing OKRs. And he was able to sell it. And so his buyer was the head of HR, and they said, "Okay, yeah, we'll give this a shot." And he had a couple companies using it, and they would use it for one quarter. Rs. And he was able to sell it. And so his buyer was the head of HR, and they said, "Okay, yeah, we'll give this a shot." And he had a couple companies using it, and they would use it for one quarter. And then the next quarter would come around, and they were like, "Didn't go that well last time. I don't know, the employees don't seem to like it. I don't know." And then the quarter after that, they were like, "No, we're not buying this, we're not using this." And so Jack pulled off the pivot to people management. And the way that he did it was he actually kept the persona. And so this gets into the ideas of the four Ps, and I'll talk about this a little bit more. This is our version of the four Ps. You've got the persona, the problem, the promise, and the product. And all four of these things have to line up. Your product has to deliver a promise that solves the problem of your persona. And so Jack actually kept the persona. He was like, "I've gotten to know these heads of HR really well over the last six to nine months. I text with them, I go out to coffee with them, I'm friends with them, I know them really well. This OKR thing just doesn't seem to be a big deal for them, but they've got other problems that I could look at solving." And the interesting thing was that timing, it was mid-2010s, performance management had started to come back in favor. It was like this pendulum. There was a period of time where performance management was really important, and then all these companies were like, "We're not doing this anymore." And then the pendulum swung back, and around 2015, 2016 was that time. And so Jack literally showed them Figma mock-ups. There was no product, but he's like, "What if I could solve performance management for you in a way that is much more modern and much more employee-friendly and manager-friendly and the whole thing's just going to work better?" And the response was off the charts. And people wanted this thing. And I believe he sold his first five or 10 customers with Figma mock-ups. Before, he hadn't built anything really. And so that, I think, is an interesting example of he was stuck in the zone of people didn't love what he was doing. He kept the persona, but he changed the problem that he was solving and the promise he was delivering through the product. And we do a whole section on pivots and when to pivot and how to pivot. And I think this is actually the best framework for this, is the four Ps. Lattice kept the first one but changed the others. Vanta changed all four. There are other products like Plaid that actually kept elements of the product they were doing. So I don't know if you know the story of Plaid, but Zach Perret was building... Plaid started out not as like a API for bank accounts. It started out as a consumer budgeting app. It was a consumer app. And it just was supposed to help you save money and budget and stuff. And it just wasn't that popular. And the founders were frustrated, but they had built this part of the product that enabled the app to connect to your bank accounts, and had solved all the nitty-gritty issues with that. that popular. And the founders were frustrated, but they had built this part of the product that enabled the app to connect to your bank accounts, and had solved all the nitty-gritty issues with that. And then they found that their friends wanted to license it from them. So Zach had a friend at Venmo who wanted to license this, and they got Robinhood at some point, they got Coinbase at some point. So that's an example of they actually kept a lot of the code that they had written. They kept the product, but they completely changed the other three Ps. Instead of solving for consumers who have a problem with budgeting, we are going to solve for developers at fintech companies who have a problem connecting to bank accounts. And it was a total flip of the four Ps. But that's why I really like this framework because I think it really helps founders think in a structured way about this.…

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