There are 3 broad risks in the startup’s journey – product, market and execution risk. A startup grows from idea to IPO by eliminating these systematically along the way. Let us examine these. – Sajith Pai
🧵 1/ There are 3 broad risks in the startup’s journey – product, market and execution risk. A startup grows from idea to IPO by eliminating these systematically along the way. Let us examine these.
2/ First, product risk. Does the product you designed solve a problem for a customer. Does s/he care? Getting to a minimum viable product (MVP) broadly eliminates ~80% of product risk.
3/ Market risk – is there a market for the product you created, or can you iterate to a problem for a paying market? Getting to product-market fit (PMF) is about eliminating this risk. PMF eliminates ~90% of market risk for the then product, I think.
4/ Finally, Execution risk – can you keep feeding and cranking the growth machine, given you have PMF, without f*king up along the way?
5/ Important. Sometimes you can hit PMF and think market risk is eliminated for it to reappear. PayTM is an extreme example. Market risk reappeared when UPI became bigger and faster-growing. They have had to focus on selling financial services (new market).
Specific investors help founders navigate these risks – Product risk – angels/accelerators/pre-seed funds/soloVCs – Market risk – seed funds (At Blume, helping founders move from MVP to PMF is the promise we make) – Execution risk – Series A+ / growth capital to help you scale.
7/7 This is a simplistic model, but a useful framework for founders to keep in mind. Would love to hear thoughts. Are there any other bigger risks I havent addressed that doesnt fall into these categories?