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What can you learn from Superhuman’s product-market fit playbook?

[Update on Feb 26, 2020] Rahul Vohra has recently published a super cool interactive tool so people can use Superhuman’s PMF framework for themselves. Check it out here.

As I am building-out my startup Workomo (helping knowledge professionals supercharge their professional relationships), have already used so many ideas from this method. My detailed take in this article below.

One of the best articles I have read in recent times is How Superhuman Built an Engine to Find Product/Market Fit by Founder-CEO Rahul Vohra. As I have been building Workomo over last few months, the overarching goal for me as a founder continues to be — how to achieve PMF while minimizing time spent & capital utilized? Having read Marc Andreessen’s legendary essay on defining PMF (“Product/market fit means being in a good market with a product that can satisfy that market”), as well as all YC stuff on the topic, I had developed a playbook for it in my head:

  1. Make something people want
  2. Be lean (product development approach + capital)
  3. Launch simple & quick
  4. Organic demand generation (networks + communities + word-of-mouth)
  5. Identify early adopter persona
  6. Iterate based on their feedback
  7. Eventually “delight” & consequently, “retain” early adopters
  8. Test how much will they pay
  9. Get to 10, then 100, then 1000 “retained & paying” users
  10. Scale-up from there

As a founder dealing with so many unknowns, one is always looking for actionable insights, more than theoretical advice. Reading about the Superhuman experience just gave me so much execution color on this PMF playbook. I think every founder (and even venture investor!) should absorb these valuable insights so sharing my notes & key takeaways from this article.

Summary of Superhuman’s deconstructed product-market fit playbook:

#1 PMF takes time

#2 Quantify PMF via a single, North Star metric

#3 Structure & execute the user survey process well

#4 Create a highly detailed user persona of the High-Expectation Customer

#5 Focus on delighting a small number of users first

#6 To convert users that are “one-the-fence”, focus on what your fanatic users love the most about your product

#7 Two-pronged product planning approach to move towards PMF — focus on core strengths + address core concerns

#8 For feature prioritization, stack-rank to get to “lowest cost, highest impact” features

#9 Rinse, and repeat…

Let’s dive into these elements in detail.

  1. PMF takes time

Superhuman team first started coding in 2015 and it’s only in last few months that they have attained a critical mass of vocal adopters, who are in-turn, making the product viral. A reality check for all of us in terms of how much time it truly takes to make something people want, and therefore, the value of patience in founding teams (& investors).

2. Quantify PMF via a single, North Star metric

A big challenge in working towards PMF is that it appears “fluffy”, especially when as a founder, you are trying to align your engineering & product teams around it and even more so, when you are trying to set an actionable & trackable process roadmap for it.

The best way recommended is to quantify PMF in terms of a North Star “leading” metric.

The Superhuman team used the following leading metric to quantify PMF (originally articulated by Sean Ellis in this article) — just ask users “how would you feel if you could no longer use the product?” and measure the percent who answer “very disappointed”. The threshold for having achieved PMF is 40%.

3. Structure & execute the user survey process well

Perhaps the most refreshing info in this article are the details Rahul shares about the user survey process they ran, to gather data on the PMF North Star metric:

a) Identify users who used the product at least twice in the last two weeks

b) Exact survey that was sent out given below (just the minimum number of critical questions were included, amazingly succinct yet effective!)

PS: I loved the 2nd question, where existing users are prompted in a way, to describe their own persona. Makes it so much easier to clearly identify who your real early adopters are. More on this later.

c) Classified the responses into 3 buckets — 1) Very Disappointed, 2) Somewhat Disappointed, and 3) Not Disappointed.

d) Assigned a persona to each bucket, to identify the “Very Disappointed” user persona (the actual early adopter)

To me, this entire user survey process is the core of the PMF playbook, and something I found exceptionally insightful.

As has been my learning doing Workomo’s customer development process, at this really early stage of the company, the number of respondents matter much less than you think. Some data is better than no data, especially coming from actual, retained users. Superhuman mentions anything more than 40 responses as an adequate sample size (at the time, their universal sample set was only ~100–200 users that could be polled!!)

4. Create a highly detailed user persona of the High-Expectation Customer

I think the most clever trick in the above user survey structure is Q #2 — “what type of people do you think would benefit most from Superhuman?” ‘Cos, people tend to describe their own personas as a response. Analyze responses to this question only for the “Very Disappointed” bucket, and you end up with detailed personas that users themselves have pretty much self-created for you!

Going from this 1st level user persona…

1st Level User Persona

…to the 2nd level user persona.

2nd Level User Persona

PS: have been searching for what an optimally-sized user persona should be like for a really early stage startup. This is a great example — ~200 words, 2 paras; captures both professional & personal behavior, motivations, quantified behavioral characteristics, relevant life goals and desired outcomes/ end-state.

5. Focus on delighting a small number of users first

Paul Graham always says it; Superhuman case study just confirms it — define a narrow market, delight, dominate & then grow out from there.

Reproducing this quote by PG, just to drive home this point:

“When a startup launches, there have to be at least some users who really need what they’re making — not just people who could see themselves using it one day, but who want it urgently. Usually this initial group of users is small, for the simple reason that if there were something that large numbers of people urgently needed and that could be built with the amount of effort a startup usually puts into a version one, it would probably already exist. Which means you have to compromise on one dimension: you can either build something a large number of people want a small amount, or something a small number of people want a large amount. Choose the latter. Not all ideas of that type are good startup ideas, but nearly all good startup ideas are of that type.”

6. To convert users that are “one-the-fence”, focus on what your fanatic users love the most about your product

Key to converting more on-the-fence users into fanatic users is first identifying the core 1–2 strengths of your product. The reason being, non-fanatic users that fundamentally care about these strengths, are the ones most likely to convert into fanatics. However, this requires addressing their top 1–2 product concerns.

In Superhuman’s case:

Core strengths (as told by fanatic users)— speed, focus, keyboard shortcuts

% of “Somewhat Disappointed” bucket users, who care about “Speed” as the main benefit — 30%

For these 30% of “Somewhat Disappointed” users, what are their primary concerns (as told by them in the survey)— lack of mobile app (MAIN) + integrations, calendaring, better search etc.

7. Two-pronged product planning approach to move towards PMF — focus on core strengths + address core concerns

Boom! Post the above 6 steps, now you have a clear roadmap of features needed to convert on-the-fence users to fanatic users, and inch closer towards that elusive 40% PMF benchmark.

Your PMF product plan needs just the following 2 strategies — 1) doubling-down on core strengths that are loved by fanatic users+ 2) working to allay concerns & feature requests from on-the-fence users.

8. For feature prioritization, stack-rank to get to “lowest cost, highest impact” features

Use a combination of survey data and your qualitative product instinct to arrive at the low-hanging features (low cost + high impact) that can start delivering immediate value to users.

9. Rinse, and repeat…

…until you get to PMF!

Hope you find this deconstruction useful for your own journey towards PMF. Would love to hear any specific strategies that have worked for you.

Side Note: am currently building Workomo, a smart & simple professional relationships management hub for the new-age knowledge professional. If you would like to transform yourself from just a “networker”, to a deep “relationship builder”, do sign-up to receive private beta access. Also, check out this post on Workomo’s long-term Mission & product thesis.

How to think about building features at the beta stage?

It’s been an interesting journey for me as a product person, building Workomo over last few months. Having anchored the company mission on my personal pain point, the product roadmap for Workomo (at least for next 24 months) is quite clear in my head. Still, it’s not been easy to think through the order & prioritization of building features. This is a completely new “0-to-1” challenge for me as in my previous roles at Alibaba, Quixey and IDG Ventures, I was mostly used to evaluating, building & scaling products with at least some existing user traction.

As I work towards the private beta release of Workomo, the following frameworks have been really helpful for me in product planning:

  1. Running Lean by Ash Maurya — I really identify with the Lean way of building early stage products. While certain elements of the Lean process haven’t worked particularly well in my case (mockup based proto, hacking a solution without UI/ UX considerations), I have actively used the major core principles of Lean philosophy — iterative approach, user-pull over company-push, maniacally tracking return-on-effort, avoiding wastage, only focusing on 1–2 activities that matter at this stage of the startup. Though, it’s important to point out that I have found the need to adapt these approaches to my context by suitably modifying them.
  2. Focusing on the product’s “Atomic Unit” — I learned of this concept via a recent LinkedIn post by Pravin Jadhav. It was originally articulated by Fred Wilson in this 2012 post. What are the atomic units of popular products? Twitter — tweet, LinkedIn — resume, Instagram — picture, Gmail — email, Dropbox — file. It’s a lovely way to think about your product stack. For Workomo, the atomic unit is “a contact”. And that’s what I am building first for the private beta release.

I was on a Zoom call today morning — the moment I ended it, I received this version update pop-up, with following new features:

Zoom is releasing features like confirm starting video when joining a meeting, dropbox integration etc. ONLY AFTER going public!! Just proves that as early stage founders, we need to be much, much more disciplined about building additional features into our products.

Ultimately, there will be one, core UVP feature that will mainly drive user adoption. Our job as product founders is to discover & build it in an iterative manner while burning through minimum set of cycles.

PS: Workomo is your smart & simple professional relationships management hub. If you are sick of managing your networks on an excel sheet, do sign-up for free private beta access.

Introducing Workomo — smart simple professional relationships management

Am excited to share the private beta launch of the product I have been building over last few months — Workomo.

Workomo is your smart & simple professional relationships management hub.

Workomo was born out of my own frustration of finding it really hard & inefficient to engage deeply & build stronger relationships with my top professional networks. During my career as a VC, startup operator and founder over the last decade, spread across US, India and China, I have been a power user of LinkedIn & Twitter to expand my network. However, while they have helped me to grow my “connections”, they have added minimal value to my effort to build truly meaningful career “relationships” that drive tangible value in my professional endeavors and help me achieve my career goals.

This is because I need a very different set of product capabilities to truly go deeper with my networks. Workomo’s product vision is specifically centered around these elements — I call them the CUDO stack:

Curate — Defining who these top relationships are, where I need to double down. Maintaining an intelligent & interactive database that makes networking “actions” like sorting, tagging, messaging, searching etc. easy.

Updates — Staying contextually updated on these people, to have a personalized view of their career approach, aspirations & needs. Likewise, also being able to share more privileged & personal updates about my career with them. This makes it easier to double-click on mutual areas of interest, proactively identify tangible collaboration opportunities & have powerful talking points during mutual interactions.

Dialogue — Being able to have a rich dialogue around specific topics or opportunities. Easily sharing privileged career updates, moments & info with a curated group of people in a clutter-free environment that doesn’t create noise for both sender & recipients. Enabling high-quality, two-way, double opt-in interactions to happen, instead of impersonal emails or noisy messaging groups.

Opportunities — Finally, if I can curate my network, stay contextually updated on them and have a meaningful, double opt-in dialogue with them, I can combine these 3 forces to drive tangible value exchange with my top career relationships. Eg. reaching out to 5 old customers for product feedback on my new startup, sharing an angel/ VC deal with a small, curated set of people, connecting a top engineer with select firms where I see a mutual fit, doing a limited & high-quality outreach while looking for a job etc.

While CUDO is the long term product vision, Workomo will initially offer a tantalizing sliver of this stack, something that delivers immediate value to early adopter users, and then closely partner with them to build it out as per their needs.

While the genesis of Workomo is aimed at solving my own pain points, am creating it for YOU — the new-age professional, working in this disruptive knowledge era. I want to equip you with tech-driven capabilities that help you move away from garnering more LinkedIn “connections” that you have never met or heard of, or more Twitter “followers” that only drive dopamine & no real job value, to having a set of deep, meaningful professional relationships that help you achieve tangible career goals.

Ultimately, Workomo’s mission is to build technology that helps professionals move away from generic, top-of-the-funnel networking, and towards creating a set of meaningful, highly engaged relationships that truly help you achieve your career goals.

Workomo is currently in private beta. If you find this intriguing enough and would like to become an early adopter, please sign up to receive a free private beta invite.

Excited to hear your initial thoughts & feedback, and looking forward to serving you in becoming an empowered professional relationship builder.

Low burn is a career superpower

Living costs are increasing rapidly across major economic cities globally, be it SF, NY, Sydney, Shanghai, Bangalore or London. A key reason is concentration of knowledge opportunities in specific centers in each country, with other cities lagging behind in new job creation and salary growth.

At the same time, professionals in these geos are also searching for more flexibility compared to previous generations — things like remote work, ability to travel frequently, taking sabbaticals to work on a personal mission, more involved parenting etc.

In order to reconcile higher living costs with more life flexibility, I think an under-rated superpower is keeping your household cash burn low. It means proactively living below your means & cutting unnecessary expenditure, essentially as a trade-off for more freedom. It’s very similar to a low burn startup, which always seems to have much more runway & options of building the business in an agile way, compared to its extravagant peers.

With all our careers exposed to so many external risks that are frankly, uncontrollable, having a ‘low burn’ life provides the necessary resilience to manage uncertainty, tide over tough times and still live with the freedom you want.

As one grows older, one realizes that true success is actually freedom to make your own choices. So the next time you are about to take on an expense that increases those monthly payments, think about it as a trade-off with your overall freedom to make life choices.

How Silicon Valley startup narratives fool us

One big realization I have had as a founder over last year or so — all Silicon Valley startup narrative is post-facto. Both founders and media conveniently don’t include the real “initial phases” of the company. These include things like the 2nd co-founder getting “recruited” much later, an old services biz revamped to appear like a fresh startup, an advisor/ angel joining & getting co-founder status, taking on a product that was in reality, built by other devs who didn’t see value in it etc. These inconvenient and scrappy realities are glossed over, to paint the narrative of a smooth curve — 2 co-founders, one engg. and one biz, met in Ivy league or top tech co., fell in love with same idea, launched, raised, scaled…done deal.

Till very recently, I had no idea that 1) Travis isn’t the original founder of Uber, but was an advisor to the original devs who created it and then later, saw the potential and hopped on, or 2) Elon Musk isn’t the original founder of Tesla, but had led the Series A round.

A bad side-effect of this managed PR is that new founders take all these narratives as playbooks. So, either they try and forcibly recreate it, or give up altogether once they don’t see a similar narrative coming together. Established founders & investors also don’t call this out.

Going forward, we should always try and peel the onion on startup PR narratives. Actively look for bias by asking critical questions like who is writing the story or Medium post, and what incentives are at play. Talk to operating people to get the real execution insights on these companies.

In today’s age of rapid news cycles, planted news, overzealous investors and internal PR teams, it’s foolish for founders to base our strategies and critical biz/ life decisions on what the media is telling us. In most cases (based on what I see), startup media stories are biased to tell the “curated truth”, with a specific end-objective in mind. As founders, let’s be smarter in digesting & acting on them.

What Indian lending startups & investors might be under-estimating

Going by the struggles of massive Indian financial sector organizations like banks, NBFCs etc., in terms of discipline around disbursal, risk assessment, collections & NPA management, I feel startups in this space should brace for serious shocks as they scale.

A mistake that founders and investors in this space will likely tend to make is to get carried away by the “fintech wave” phenomenon, approach these businesses like any other consumer internet one, and grossly underestimate the inherent risks and toughness of building a finance business. What I found funny was a few Indian investors boasting about their lending startups portfolio — “our portfolio has disbursed $X bn in loans”. If I stand with a stash of cash on a street corner and ask people to take a loan, am sure even I should be able to “disburse” quite a bit :).

I know everyone is trying to become the Ant Financial (Alipay) of India but many don’t realize how it really evolved as an organic extension to the commerce biz and how the entire set of Alibaba ecosystem use cases feed it with critical data that helps it tremendously. Also, Ant Financial gets a captive user base of both individual users and merchants/ SMBs (along with all their data) via the Alibaba commerce marketplaces (Taobao, Tmall, Tmall Global, Juhuasuan etc.), essentially for no cost as part of a juggernaut. It’s only in last 5–7 yrs that Alipay started following a dedicated Super Apps strategy, going up against WeChat Pay and adding a slew of O2O use cases via investments/ acquisitions. But by then, it had already become #1 in several fintech segments in China (eg. wealth management, credit scoring), courtesy the Alibaba commerce ecosystem.

It’s important for all India fintech/ lending founders and investors to be aware of Alipay’s history & playbook, as well as how tough Indian financial sector itself is and the risks involved. It should reflect in the way these startups get capitalized and operationally built out, including proactive risk management.

Decision-making learnings from India’s James Bond

I have always been fascinated by Ajit Doval, current National Security Advisor (NSA) to Prime Minister of India. At least from what I have been able to research, he is India’s first NSA to have also previously been an intelligence agent & ground operative behind enemy lines for decades. This makes his talks on defense strategies & decision making really fascinating, as he speaks from his experience on the ground, dealing with extremely high-pressure, high stakes situations.

I recently came across Mr. Doval’s interview called Talking Point. Similar to the Art of War by Sun Tzu, which has fascinating leadership & decision-making insights from ancient Chinese military knowledge & strategies, Mr. Doval gives some interesting insights from his intelligence & military operating experience, particularly around tough decision-making.

Here are some key takeaways from this interview:

  1. What makes a decision tough? — a decision is tough when its consequences are “large” —quantum of impact is large, or impacting large number of people, or consequences remaining for a long period of time.
  2. Objectives (why)→Decision (direction) →Option (how to execute) →Execution — this is the full-stack framework for tough decisions.
  3. Clearly articulate your objectives for taking a decision — take out all adjectives and adverbs, only have nouns and verbs. Make it as simple and crisp as possible. eg. “ I am taking a decision to [ACTION] on [SUBJECT] on [SCHEDULE]”.
  4. Do an objective analysis of your capabilities before taking a decision & choosing optimal execution option — what resources are at your disposal? What is your level of understanding of the subject?
  5. Do an objective analysis of your state-of-mind before taking a decision & choosing option— am I angry? Am I fearful for my life? Am I fearful for my family? It’s almost impossible to take objective decisions under any sort of heightened emotional state.
  6. Each decision option has a cost, associated time and probability of achieving your objectives — you need to choose the option which is most effective on cost and time, while having sufficient chances of achieving your objectives outlined earlier.
  7. Frequently, decisions are right but option chosen is wrong — important to differentiate between the two (my interpretation is that decision is more about direction while option is more about executing on the direction). Wrong options typically get chosen due to lack of experience, knowledge or sufficient preparation.
  8. Manage your fears by articulating them clearly — once you do this, in most cases, you realize that the fear isn’t as big or binary as you thought. Then, mitigate the specificities of this fear via hard-work, preparation and using your knowledge/ expertise.
  9. More important than obsessing over how to take a decision, is being prepared to cope with what happens after a decision has been taken — human brain has limited capabilities and we aren’t crystal gazers. In most cases, vital decisions are taken under stress, anxiety and uncertainty. Given nobody really knows whether a decision is right or wrong, it’s more important to think about how you will cope with the aftermath, in case the decision doesn’t pan out the way you expected.
  10. Assume that the “as-is” situation will unexpectedly change after your decision — be mentally prepared to cope with a new set of reactions, externalities and realities. Trust your capabilities and resources.
  11. While taking vital decisions, work out a “worst-case scenario” and prepare for it — first, figure out if you can survive the worst-case scenario. Second, work on bringing down the cost of this scenario, to bring it to an “affordable” level where the risk becomes worth-taking. Doing this requires time, preparation and knowledge.
  12. More important than making the right decision is making the decision right — you need to use your commitment & hard-work to ensure that once the decision is taken, it delivers positive results.
  13. For decisions with potentially massive impact, always have a “fallback position” — having a contingency plan is crucial.

In addition to these widely-applicable insights, Mr. Doval also talks about his execution style. I found these points interesting so also including them below:

  1. Solo — prefers being a solo operator. In an intelligence mission, risks go up as dependencies on other people get added, especially due to potential Prisoner’s Dilemma in case the mission blows-up. He might totally believe in a mission, while someone else might be doubtful. Hard to achieve success in a doubtful state of mind, particular as an operative agent. He doesn’t like to expose other people to risks that he, personally, is willing to take.
  2. Surprise — doesn’t use the same operating strategy/ style more than once. This forces him to articulate a fresh set of assumptions every-time, and validate them again. This takes out any historical bias from decisions.
  3. Speed — if you are fast, even if the enemy knows about your mission, you can still beat it say even by a few secs, achieve your goals and escape out of the situation. Key is to strike fast and get out fast.
  4. Secrecy — in any type of situation, being able to hold vital information and secrets within you is critical.

While we consume majority of our content from successful founders, investors and business gurus, it’s important to diversify sources of knowledge and refer to learnings from other disciplines. Personally, I have found 2 such diverse areas very useful for both professional and personal learning — 1) creative arts (movie directors, artists, authors etc.) and 2) military (navy seals, intelligence ops, historical warfare strategies etc.).

Let me know if you found this piece helpful, and what non-venture areas do you refer to for fresh insights.

The Daily Battles

All worth-while things in life — raising kids, maintaining our closest relationships, building a company, getting fitter, eating healthier — tend to be perpetual battles that need to be fought almost on a daily basis. Everyday (or very often), you need to re-assess where you are and where you want to go, assimilate the ever-changing context around you, figure out the best way to move forward in that moment, and execute on it with the knowledge that your goal is a constantly-evolving & moving target.

There will, perhaps, never be a point in the journey where you will say that “the job is done, mission accomplished” as each goal will generate yet another one. This is why it’s important to respect these daily battles, and maybe then, you will start enjoying them and make the most of each day you live.

True competitive advantage is a “Mesh”

Today, I was remembering my strategy professor from ISB Prof. Prashant Kale. All my batch-mates will agree that he was probably one of the best, if not the best, professors that year for Class of 2010. In particular, one of his classes where he taught the legendary Southwest Airlines strategy case is imprinted in my consciousness — I even remember exact drawings he created in the class.

The key takeaway from that class was that the competitive advantage of Southwest Airlines wasn’t a single linear element; rather, it was a “Mesh of inter-connected, inter-dependent, self-reinforcing activities” that was almost impossible to replicate by competition. Eg., turning around a plane in 15 mins (fastest in the industry), which required the gate staff to operate at a certain cadence, which in-turn, required the check-in staff to do certain activities at a certain speed etc. Essentially, executing any precedent element well made the next dependent element even stronger; conversely, if one of the elements was poorly executed on, the entire mesh advantage ceased to exist. This Mesh model has been a transformative strategy concept for me, and has been a key foundational element of my thinking.

Illustrating the proverbial “Mesh of Competitive Advantage”

I recently got reminded of this concept again after a decade, this time in an entirely different context of public market investing. I was reading the Q1 2019 Quarterly Investor Letter by O’Shaughnessy Asset Management (OSAM), a top quant asset management firm founded by the legendary public markets investor Jim O’Shaughnessy. This letter is particularly fascinating, as it talks about how to cultivate real edge as an investment firm.

OSAM defines the following framework for real investing edge (quoting the letter):

  1. “Real investing edge should (instead) be cultivated at the organizational level.”
  2. “Properly built, an edge should be very difficult or impossible for others to replicate.”
  3. “Ideally, the edge naturally increases over time — something venture capital investor Keith Rabois calls an “accumulating advantage.”

Specifically, OSAM does 2 things that drive the edge — 1) consciously building a Research Graveyard, which essentially means doing lot of research, data analysis and number crunching projects that don’t necessarily lead to immediately improved investing outcomes but increase the overall ideation & knowledge of the firm in a compounded way over the long term; and 2) building tools (data-sets, software and combos thereof) and then deliberately opening them up publicly for other researchers to use (like the way Amazon opened up its cloud infra to developers, creating AWS), whose usage, in turn, has generated some of the best research insights for OSAM.

As a finance and investing person, while both these elements are individually interesting to me, the real deal was this sentence (again quoting the letter):

“These things — software, data, research partners, our graveyard, even the podcast and our twitter activity — all link into and depend on each other, which makes each more valuable and harder to copy.”

“Think back to the ownership data project. Without other connected tools, that would have just been a dead idea — time wasted. But now the ownership data set has become a critical piece of another software tool we use for clients called Portfolio X-Ray. It is now also a new data set available to research partners, who may find something interesting that we did not.”

This is the “Mesh of Competitive Advantage” all over again. A set of activities that, while look replicable in isolation, are almost impossible to replicate by competition as an inter-dependent, inter-connected, self-reinforcing system. This, my friends, is where true competitive advantage comes from!

This is the same reason why, despite having an incredibly transparent investing strategy, framework, terms, processes & activities, other venture firms are unable to replicate the Y Combinator model. This is the same reason why I saw Alibaba winning in China eCommerce (a rhythmic mesh of commerce, payments, logistics, cloud and advertising that is perhaps, impossible to replicate even with infinite capital). It’s the same reason why, as Prof. Kale told us in 2009, Southwest won in the US airline market.

As I think more about this concept in the context of tech startups & Silicon Valley, I believe the following execution elements are important drivers of on-ground success:

  1. Mesh creation has to be deliberate — it’s really hard to defend individual, linear advantage elements in the long run (eg. just having more capital than competition).
  2. Constituent elements of the Mesh need to flow from an authentic place residing inside founders/ leadership teams — what we call as DNA, else it’s hard to sustain.
  3. The Mesh strength compounds over time — demands consistent execution over a long-enough period of time.
  4. This is why true diversity in the team is important — underlying this Mesh of Competitive Advantage, is really, a Mesh of diverse people, each contributing a uniqueness that, combined as a whole, is a super-power. Like the YC Founders or Paypal Mafia.

Would love to hear how you have created competitive advantage for yourself/ your companies.

Side-note: the “Mesh of Competitive Advantage” can also be used to differentiate yourself as an individual professional. Instead of being linear in your career, try to create your own cross-functional, cross-sector, cross-cultural & cross-market Mesh of skills & experiences that, while individually might not look compelling enough, combine together to give you a truly differentiated world-view and approach to life. In today’s age of automation & tech-driven leverage, having this type of Mesh is worth its weight in gold as it can’t be replicated by software; rather, software & tech tools can be used to leverage it up & further magnify its impact.

Related note for parents raising kids in Silicon Valley: given we live in an echo-chamber, with template approaches to pretty much everything (from hiking at the same spots, wearing similar Patagonia vests, to starting up and listening to the same podcasts), it’s important we consciously expose our kids to the non-Silicon Valley world. We would do well to nurture their authentic qualities and original habits, whether they fit with the Valley way of doing things or not. In fact, I would argue that the more contrarian or differentiated these intrinsic personal qualities are, the more we as parents, should encourage them. This will set them up as adults to create their own, authentic “Mesh of Competitive Advantage” that stands the test of time and disruption.

Understanding Fixed vs Variable Costs as a Founder

To be capital-efficient as a founder (also applicable to life, in general), when evaluating various cost line items or taking on a new cost, have a clear understanding of “Fixed” vs “Variable”. Variable Costs are driven by your intended “velocity” and therefore, can be controlled during tough times via a frugal approach (cut variable marketing spend, let go of expensive contractors etc.). Fixed Costs don’t care about your velocity and will keep eating you up (housing rent/mortgage, office space, full-time salaries etc.). They are much harder to control, given they reflect a certain baseline you have up-leveled your startup (or life) to. Paring down Fixed Costs will require more drastic down-leveling, including completely letting go of certain assets or experiences.

The issue with Bay Area startup environment today is extremely high Fixed Costs (housing, child-care, salaries etc.). These are uncorrelated to the actual state or momentum in your startup so founders have no choice but to live with them. You can’t be frugal with Fixed Costs beyond a point, as they are driven by the external environment, not the choices you make. This, in a nutshell, is the real challenge facing Silicon Valley founders.

Here are some ways to proactively manage your startup’s Fixed Costs at early stages of the Company:

  1. Explore building a non-Bay Area distributed team — to balance output with salary costs, at least until you see the business momentum required to support Bay Area salaries.
  2. Be generous with equity, (relatively) tight with cash — I know this is a hard one, especially while hiring engineers in today’s market. But as founders, we need to be disciplined about this. I would rather wait out for the right candidate who believes in aligning incentives with the real situation of the startup. For instance, if someone is asking for high cash compensation in a pre-PMF startup, this means they are not the right fit for this stage. I am all for doubling-down on higher equity, even higher than market standards, for early risk-taking hires. But every $ of cash being paid out needs to have a solid justification. Anyone who seriously wants to join a really early stage startup, needs to understand and appreciate this viewpoint.
  3. Try converting Fixed Costs into Variable Costs — some ideas could be paying sales people more on % of sales commissions and less on fixed; going for an “on-demand” co-working space with elasticity to quickly scale up/ down; keeping specific functions eg. designers, content writers etc. (these functions need to be chosen really carefully) on contract per “as-needed” basis, instead of full-time etc.
  4. Be frugal on G&A — optimize costs on office space, service providers, vendors, food etc. In particular, Bay Area startups have a tendency to splurge beyond their means on fancy office spaces, lavish off-sites, dinners at marquee restaurants, expensive swag etc. These non-core costs tend to add up and hit your budget more than you might realize.
  5. Leverage free ways of brand-building — instead of spending tons of $$ on brand marketing to drive early awareness (eg. conference sponsorships, which are essentially Fixed Costs), leverage free channels such as blogging, building a community on social media (Twitter, LinkedIn, Quora etc.), podcasts, creating a compelling website, white-papers, research articles, invited speaker slots etc. Early stages of a startup are all about cost-efficient marketing. This can only happen when founders focus on the above channels to build their startup’s brand, their personal brands as well as communities around their product. Austen Allred, Co-founder and CEO of Lambda School, is doing this very smartly.

Would love to hear what ways of Fixed Cost management have worked well for your startup.