There isn’t a paint-by-numbers kit for any part of company building. To mix our metaphors here, it’s more like how the best movie directors are obsessed with watching great films to find inspiration for their own — it’s not copy-paste.
That said, many founders and company builders have opened up their helpful frameworks and tactical advice in an effort to share inspiration so others can avoid starting from scratch. Whether it’s the number of outbound recruiting messages it takes to land a candidate, or the way to structure a pitch deck to raise a Series A round, or the ratio to follow when building out an EPD org, founders can lean on helpful rules of thumb and detailed resources on most startup topics as they seek to chart their own course. (You’ll find hundreds of articles of this very sort in the archives of The Review, of course.)
But what it takes to unlock PMF has historically been more of a black box. Here at First Round, we’ve been on a mission to change that. More specifically, we’ve been working to answer this question: When you rewind the clock, what did the best founders do in the first few years of their company’s life?
In addition to recently launching PMF Method (a free 14-week intensive experience designed to help exceptional B2B founders build epic companies) and sharing our own internal framework with detailed benchmarks, we’ve embarked on a storytelling project here on The Review to bring you those answers.
For more than a year and a half now, we’ve teamed up with First Round Partner Todd Jackson for our Paths to Product-Market Fit series, a wide-ranging public study into how all sorts of different founders tackle the journey to product-market fit. Jackson has a particular passion for this topic, as he’s experienced the highs and lows of seeking PMF from a few different angles: taking Gmail from beta to more than 200 million users and tinkering on Facebook’s early Newsfeed as a PM; starting his own company, Cover, back in 2013; and leading Dropbox’s product and design org through IPO. Now, as a Partner at First Round, he spends his days with early-stage founders tackling this very challenge.
With his help, we’ve interviewed a wide range of founders to unearth tales of their winding path from idea to PMF — skipping over the glamorous, up-and-to-the-right talking points to find out what really happened behind the scenes.
We’ve told the real stories of false starts and pivots, like how Plaid started out as a consumer budgeting app, how Lattice was focused on OKRs before shifting to performance management, and how Shippo’s founders were originally building an e-commerce site. We shared vivid and detailed anecdotes, like how Vanta cycled through different company ideas, how furiously coding on a train ride convinced Ironclad to change its category, and how Webflow almost sputtered out after a splashy launch on Hacker News.
But ever hoping to be equal parts inspiring and practical, we’ve also dug into the tactical nuts and bolts, from how Gong excelled at leveraging design partners and how Material Security pressure tested different ideas, to how Retool refined its ICP and Airtable took two slow years to launch its beta.
Since launching this series, we’ve been privileged to showcase dozens of remarkable founders and, thus, dozens of different flavors of company building journeys. We thought it was well worth revisiting some of the biggest lessons that have stuck with us — so we plucked out our favorite bits of advice from each story in the series so far. We’ve also included several videos of the interviews throughout, in case you prefer to hear your company building advice straight from the founder’s mouth (and plenty of the series’ popular timeline graphics, in case you prefer the continuum format).
The advice that follows touches on all sorts of different mile markers along the PMF journey, from coming up with the idea, validating it, building the initial product, pivoting, and more. Our goal is that you can find a dose of inspiration, the antidote to a particularly thorny 0-1 problem you’re facing, or a fresh perspective to reframe your thinking.
If you’re looking to dive even further into what it takes to find product-market fit, check out our new framework, The 4 Levels of Product-Market Fit. We share detailed benchmarks to aim for, case studies and actual data from how Looker progressed through these stages, the signs that you’re getting stuck, and tactical advice from incredible B2B founders. You can also apply to join PMF Method by May 7 at 11:59 PDT to get help uncovering what customers really need, building the right V1 product, and closing your first commercial contracts.
IDEATION & VALIDATION:
“I believe a lot of entrepreneurship is very creative,” says Michael Grinich, founder of WorkOS (a platform for developers to easily add enterprise features to their apps). “You have to find ways to get your creative juices flowing.”
So, like an artist, he tinkered, toyed and devoted time and energy to honing his craft of generating ideas for the next venture. In an attempt to find fresh perspectives, Grinich went to museums, met new people and even attended a rocket launch. Sure, none of this was directly related to founding a SaaS company, but it served as creative cross-training, helping him build the muscles of innovation.
By the time he returned to New York, the pages of his notebook were brimming with half-baked ideas, and Grinich pored over the contents in search of an idea that met all of the following criteria:
- It was in a market undergoing a major transition. “I didn’t want to work in a stagnant area.”
- It was something he already had experience and skills in. “I didn’t want to go into a totally new discipline. I wanted to apply everything I knew quickly so I could pursue this opportunity faster.”
- It was in a huge market. “If the market is gargantuan, you have a lot of room to maneuver and pivot and land on something.” For example, Grinich says that if WorkOS’ original product hadn’t been successful, the team could’ve easily pivoted to build something like Rippling, a workforce management platform for HR, IT and finance.
- It was an idea that looked bad to some people but good to him. “If you have something that looks like a good idea to enough people, you risk getting into a situation where, within six months, there’s a ton of companies just like yours.” You don’t want to be in that situation. You want to be the only product in the category when you launch, and around six months ahead of the competition. So look for the solution that looks like a bad idea to enough people initially.”
- The timing was right. “Timing is the most important of all the criteria on this list. I didn’t want to wait for a market to emerge. I wanted it to be ready now. If the market’s not big, but it’s growing really fast, you can capture it. If you don’t have the skills, but you’re in the right place at the right time, you can hire the right team to do it. But if you build something and you’re three years too early, you’re screwed.”
Just build in the biggest possible market because you can’t change it later. It’s like building a house: location can’t change. You can tear down the structure and rebuild it, but you can’t change where it is.
Read more from Grinich on how he validated the idea for WorkOS and built a “minimum awesome product.”
Vanta’s Christina Cacioppo was itching to start a company — and had even taken a work hiatus to teach herself how to code to prep for becoming a founder someday. Around the same time, Amazon launched Alexa to great fanfare — and the voice assistant market had reached a fever pitch.
This sent her down a rabbit hole of what she admits now were “terrible ideas.” The furthest she got centered around a novel use case: a voice assistant for biologists working in a lab. There were a number of reasons for why it made sense at the time. “They’re doing things with their hands, they have gloves, they’re working with chemicals. Imagine trying to type out notes,” she explains.
So she found a lab, shipped them a microphone, and even built them an iPad app. “They were thrilled because no one makes software for biologists in labs,” she says. “But the market for this was the size of my thumb. It’s funny to talk about now, but it was a true low point at the time.”
With failed idea after failed idea piling up, Cacioppo reevaluated her approach and realized her mistake.
It was a bit like the children’s book “Are You My Mother?” We had built this tool and then walked around to people asking, “Do you want our tool? Do you want our tool? What about you?” And the answer was no—no one wanted our tool.
After that lightbulb moment, she dramatically shifted her strategy: No more building. Just talk to customers. “We decided we weren’t allowed to build anything at all. We had to just talk to people — and talk to them until we had a lot of confidence and a mental model of customers, their jobs, the problems they might have and how we might solve them.”
And in fact, the initial glimmer of what would become Vanta (a security and compliance automation platform now valued at $1.6B) appeared in one of the first conversations Cacioppo had using this new approach, with the Product Security Lead at Dropbox.
“What he told me when we looked at his calendar was, ‘The best parts of my week are when I get to work with product teams on security issues. I get to work with the PM and the engineers and get the right stuff prioritized and fixed. The worst part is when I have to pull together reporting on the things I’ve done to show my manager or executives, or get on the phone with customers and explain what security we do in basic terms,’” Cacioppo recalls. It’s a theme that would resurface in other conversations — and the path that would finally lead her to building a product that folks were clamoring for.
Over the course of several weekly Sweetgreen dinners, college buddies Shensi Ding and Gil Feig discovered that they were facing a similar problem at their respective jobs. Both were up against different (but equally miserable) integration projects.
But to build an enduring company, they needed more ammunition than just their own grumblings. So over the course of six months, they sent hundreds of cold emails and ended up talking to 100 different companies, sitting down with folks in every function that dealt with integrations. This wasn’t to pitch any sort of solution — Ding and Feig didn’t have one yet. “We wanted to see how many types of companies this impacts and whether there could be a uniform solution to solve this for everyone,” says Ding.
Along the way, they realized that there were plenty of folks outside of engineering who were experiencing integration headaches. It was a full company problem — touching everyone from sales to partnerships to product management and design and customer success.
While they talked with as many companies as would agree to a meeting, it became clear that there were no solutions out on the market that solved this pain point — which was only getting bigger by the day. “People were paying a lot of money for vendors and were deeply unhappy with the quality. It was also a problem that would continue to spiral — the number of B2B apps keeps increasing, and there’s going to be more and more fragmentation across the market,” says Ding. Thus, Merge was born.
Just by looking at how the market was moving, we knew someone needed to solve this problem. We wanted to make sure it was us.
While toying with the idea of building a startup focused on mental health, Harry Ritter spoke to around 50 therapists to get a better sense of their challenges. We were most struck by how he leveraged his medical background here, bringing the precision of a physician attempting to diagnose a patient to the customer discovery interviews that informed his early vision for Alma.
In addition to asking each person he spoke with for introductions to three more therapists, Ritter created interview guides that standardized the conversation with the same 10 questions across the board to avoid introducing his own bias. “They were built on some of the interviewing skills that I had from medical school. When you’re trying to diagnose someone, you’re supposed to combine both narrow questions and open-ended questions.”
- Narrow questions. These types of questions grant you a structured data set you can use to think about what comes next. For example, “What application are you using for finding new patients?”
- Open-ended questions. These let you capture information you may not have thought to ask. One open-ended question Ritter asked was, “What are the biggest challenges that you face in your private practice today?” “The one consistent theme that I hadn’t thought about was loneliness as solo providers,” he says. “Alma’s emphasis on community and connection really came out of that insight that I hadn’t expected going into those interviews.”
When faced with the prospect of picking an idea to pursue, founders can do any number of things: They can conduct customer interviews, for instance, or build an MVP. But Material Security’s founders Ryan Noon, Abhishek Agrawal and Chris Park took an entirely different approach: They started selling.
The trio wanted to start a company together and had whittled their list of ideas down to four
software concepts. “We knew all four ideas were good,” says Noon. “They were all good markets, and we all felt like we could start a company around any of them. But we knew one idea would be way easier to sell than the others, and the only way to find out was to try.”
They called this the “hot knife through butter test.” By attempting to sell each of their four software ideas, it would quickly become apparent which solution was worth pursuing before they spent any time building it. And so, it was time to enact the flight plans. Which idea would take off?
“All of the flight plans boiled down to the same thing. It was essentially find as many people as possible in your network that have anything to do with that idea, and try to sell it to them,” says Noon. All three founders were all hands on deck selling as a team sport.
Don’t ask for feedback. Don’t do user research—just try to sell your idea.
Read more on how the Material Security team whittled 25 startup ideas down to four.
Back in 2017, Labelbox co-founder and CEO Manu Sharma and his co-founder Brian Rieger had a loosely-held idea to build a tool for more effective and collaborative data labeling infrastructure, but the duo wanted to start battle-testing the idea long before building.
“We started talking to a handful of AI startups in San Francisco or within our network. We would reach out to them with our idea for Labelbox and a mock-up and ask ‘I would love to learn from you how we can solve these problems,’” says Sharma.
They got very mixed feedback from this early cohort of folks. “There were many experts in this field that had tried to solve the problem themselves, and they told us that Labelbox was an absurd idea that was never going to work. They said it was impossible to create a general product solution for such a bespoke problem,” he says.
The point of this exercise, according to Sharma, was to get a pulse check on what the AI community cared most about at the time, and how experts were approaching building their own collaborative data labeling tools. And as it turned out, amid a chorus of no’s, there were a few fans. Armed with knowledge about how the top AI experts were approaching building a collaborative data labeling product (or more accurately, how experts were not attempting to build this) the co-founders’ next step was to talk to a slightly wider audience.
“We didn’t have any discrimination on what a good person to talk to looked like or what title they had,” says Sharma. “What we were looking for was a technical leader at any organization where we could get a warm intro, whether that was the CTO, a VP, an ML engineer, or a product manager who was directly building a computer vision application.”
While the co-founders established some criteria of what made someone a good candidate to talk to and eventually pitch, they decided that they would also need a proper framework to measure any feedback they collected. Over the course of customer conversations, Sharma and Rieger were looking for two key signals that the Labelbox idea could be scalable:
- Problem validation. “We were in a vacuum of our own experiences in the data labeling world, and we had formed assumptions and hypotheses around the market. Hearing from other people that yes, they were frustrated with the desktop tools available and yes, they were working on building a solution internally and yes, they were planning to do more labeling in the future validated our assumptions on a macro level.”
- Solution validation. “Some teams were open to showing us their internal tools, which was huge. We were able to map out their mental models, how they approached data types, data structure, and the same workflows for data labeling that we were working on. This was an even more powerful signal to us because it gave us the insight that others were also trying to solve the problem we presented.”
There are two things that I firmly believe about getting past the validation phase: 1. You have to have a wildly crazy idea before it becomes a breakthrough. 2. Your idea has to be both contrarian and right for it to find success.
BUILDING THE (RIGHT) PRODUCT:
Verkada has six different physical security product lines today, but the founders started back in 2016 with video security. For co-founder Filip Kaliszan, building the right product was more about polish and focus rather than feature set.
“Once we launched the camera product, we knew what really mattered at the beginning wasn’t the reliability of streaming or the clarity of the images — it was getting the basics right. And that’s something that I remind myself and my team of to this day,” he says. “Getting the foundation and the core features done really well often matters a lot more than having a very broad range of features.”
If I had a time machine to go back, I’d probably make sure that first product experience was even more polished and refined. I would take a few things out of it just to keep it more narrow and focused.
“With enterprise, it’s much more about studying what the problems are. One of the mistakes that I see is sometimes folks listen to the customer for what they want as the solution, as opposed to listening to find out what the problem is,” says Kaliszan.
“If you talked to our customers, on the surface I think what you might get back is that they want a sum of their favorite features from all of the competitors. But if you took the best features from all of our competitors and put it into one product, you’d build a bloated product with a bunch of not so great features,” he says.
“But if you dive a little deeper in that conversation, and you try to understand why they want these features, if you go to the customer and have them show you their workflow, and take notes about the things that are broken, that’s when you start identifying the problems.”
Airtable’s co-founders, Andrew Ofstad, Howie Liu and Emmett Nicholas, had a lofty vision to democratize software creation — in this case, making databases easier for non-developers to use. It was to be a horizontal product with tons of green space to build upon. But Ofstad and team tightened up the focal point in the earliest days.
“We were focused on de-risking the main risk for the company as early as possible. For us early on, that was, ‘How do we actually make this database accessible to non-programmers?’” says Ofstad. “That meant it was all about making it easy to use, iterating on a prototype and getting lots of feedback.”
There’s plenty of conventional startup wisdom to get a super rough prototype out there quickly. But the Airtable team bucked this trend. “It seemed like launching the product publicly wouldn’t really get us more data or accelerate the path to getting there,” says Ofstad.
Separate the concept of trying to get feedback from customers and refining the product from the concept of a public launch.
Ofstad breaks down how that principle worked in practice: “Our strategy was to build a very horizontal product and then roll it out to more people over time. Very early on, we had a private alpha. It was invite-only, but you could refer other people, so that helped us get some organic growth, but not a ton,” says Ofstad. “After maybe 100 people or so, eventually we felt like we were in a good place.” This took two years. “We had to build so many features to get to something useful.”
In addition to delaying a public launch, this strategy also kept the team comparatively lean — avoiding the early-stage trap of overhiring. “This work in the alpha phase would have been really hard to parallelize. You can’t hire a bunch of engineers to make that go faster. It actually would’ve been counterproductive to try to scale it up a lot more because we needed to nail that foundation of the database. Hiring a bunch of people would have made it harder to be nimble and change the direction of that foundation,” he says.
Eventually, the team felt comfortable putting it in beta to try to get more customers — launching publicly on Hacker News. “We kept it as a beta to give us an opportunity to have a bigger public press launch later on, and to have that beta tag on in case things didn’t work right,” says Ofstad.
According to Clay’s Kareem Amin, the only way to see if there’s actual demand for your product is to do two things: 1) sell to just one ICP and 2) sell your product without adding on any new features — which can actually mask the signs of product-market fit.
“You need to pick the actual customer that you’re talking to, make sure that they’re the same customer, whether they have the same title or they have at least the same jobs-to-be-done, and then really try to sell it to them — without manufacturing new features,” says Amin. “What we did and what worked at Clay was to find people who wanted what we had, even though it wasn’t quite at the level that they needed or it was missing things.”
There’s a tendency when you’re early to be like, “We’re just missing this one thing…” But when the need is large enough, people will buy your product and wait for you to build the rest of the features. And that’s actually the main indicator that you have a product that’s worthwhile.
TALKING TO CUSTOMERS & FINE-TUNING YOUR ICP:
“You should really be spending all of your time talking to customers. And that sounds so obvious. But people will find so many reasons to not do that,” says Lattice co-founder Jack Altman.
“You’ll hear ‘I really should be recruiting,’ or ‘Some VC wanted to have coffee with me, maybe I’ll learn from them about this market.’ And it’s all a waste of time. The buyers are where the truth is,” he says.
“I actually don’t think you need to be super buttoned up and user research-y about it. You can, you can track it all, and that’s fine. But when you’ve stumbled on a real trend, you can’t miss it. And maybe you didn’t think about it during the 17th conversation, but certainly by the 38th time it was mentioned, you’ll think, ‘I’ve heard this a bunch.’ When you get to the point where you’ve talked to so many customers that you’re sick of hearing the same thing over and over again, that’s when you know, you’ve talked to enough.”
If you talk to 100 people, and you don’t take a single note, if there is a good trend in there, you will have heard it so many times that you couldn’t miss it.
To surface those true insights more quickly, Altman has relied on this framing: “One of the things that always really helped me is I would remind people that it really doesn’t help me if you’re nice to me in this meeting. I’m trying to build a company that doesn’t fail. And I can only do that if I get genuine responses from you.”
Webflow started out with a remarkable flourish. After launching on Hacker News, the product garnered 25,000 signups and $5K of MRR in the first two weeks. But as any founder who’s gotten initial takeoff knows, the tricky thing about product-market fit is that it’s a constantly moving target.
That inflection point came for Webflow in 2015. The team was burning through cash, the product wasn’t generating enough revenue to outpace their spend and co-founder Bryant Chou described it as a “do or die” moment.
So to plot Webflow’s next move and inject some life into the business, he leaned on a simple framework to get to the root of what customers are asking for — not what they’re telling you word-for-word, but something much deeper than that. Enter the “5 Whys” framework.
The framework is popular for a reason: it’s incredibly simple. After a customer shares feedback, ask ‘why’ five times in a row — no matter what their answer is. This is the tactic Chou and the Webflow team used to figure out their plan of action.
“We heard from customers that they wanted us to build a WordPress plugin. So we asked them why. They said it’s because they want to use Webflow and WordPress together. Why? It turns out that they like Webflow’s UI builder but were using WordPress’ CMS. Why? WordPress had a custom fields plugin that gave them greater flexibility. Eventually, we identified the opportunity to address the problem by creating our own CMS — one that merges the power of WordPress Custom Fields and the design tooling of Webflow.”
Based on what they gleaned from this root cause analysis, Chou and his team got to work for the next six months. In October 2015, they launched the world’s first visual CMS, which still offers a level of customizability and power that’s unmatched today. Within a month, Webflow grew MRR by 25%, hit $1 million in ARR and soon after started to turn a profit.
In the early days of building the revenue intelligence platform Gong, co-founder and Chief Product Officer Eilon Reshef was extremely intentional and choosy about design partners to team up with. It turned out to be a strategic secret weapon: Out of 12 design partners they initially worked with to build Gong, 11 converted to paying customers.
Most founders tend to think of design partners as an early-stage tactic to provide user feedback and shape the direction of a nascent product. But fast forward to now, with 4,000 customers and over $100M in ARR, and Gong remains deeply committed to maintaining robust partnerships with these folks. In fact, each of Gong’s 25 product managers are working with half a dozen design partners at any given time.
The reason they’ve kept them around so long is because of the incredible value they brought the early founder-led sales team at Gong. “They gave us the critical feedback on the product we needed, but more importantly, they helped us see and believe how Gong could shape their organization for the better in the future.”
We’re maniacs about using design partners at Gong. I would probably lose an arm before I lose the concept of design partners.
For early-stage founders kicking off their search, Reshef says folks with these two character traits make exceptional design partners:
- The Innovator: “Look for somebody who’s overexcited for your partnership. Not for what the tool does today, but the potential they see for it to change their organization in the future. These are the people who eventually will be willing to speak up and say ‘Yes, I’ve installed this software and this is the impact it made for me.’”
- The Programmer: “We also look for other types of inquisitive customers. The more programmatic ones ask ‘Can I configure it? How can I get the most out of it? Does it work versus does it promise to work?’ These are people who don’t expect to just plug in your tool and sit back. They understand they’ll have to put in time for it to work for them.”
When it comes to design partners, one of the trickiest bits can be figuring out when to start charging for the product. Reshef’s advice is to listen for when your design partners go quieter — that’s your first clue to put on a price tag. “When they stopped complaining about calls not being recorded and weren’t asking us to fix any issues, we thought, ‘Okay, if people are happily using our product and not complaining, we maybe ought to charge them something.’”
While building the product for what would become Retool (a drag-and-drop platform to help developers build internal tools faster), founder David Hsu was still trying to fine-tune the company’s ICP. In the early days, he started off with two assumptions:
- The target user for Retool was FileMaker developers. “Since Retool is a product that’s kind of similar to FileMaker, Microsoft Access or Visual Basic, we thought we should go find similar customers and convince them to try Retool. This seemed like a very plausible path to finding product-market fit.”
- The ideal company size for Retool was small startups. “When we first started the company, we assumed it would be used by other two to three-person companies. We thought our product could be a fast way for a small company to build their internal tools.”
But this was just an early educated guess (spoiler alert: It would change dramatically). Here’s the framework Hsu used to get crystal clear on the ICP for Retool:
Test your assumptions
Hsu tested his hypotheses — whether that was through extensive research or calls with potential users — to see whether his assumptions were correct.
- Target user. To get into the minds of his potential target users, Hsu “infiltrated” several LinkedIn groups for FileMaker developers and conducted extensive outreach. “We sent out a few hundred cold emails, received like three replies back and got one person on a call. That developer pretty much said that Retool is a horrible idea and wouldn’t ever consider using anything other than FileMaker.”
- Company size. Research revealed that the market for Retool was significantly larger than Hsu and his team originally anticipated. “We discovered that around 50-60% of all the software in the world is actually internal facing. And once we discovered that, we were like, ‘Wow, this is a ginormous market.’ If we can change the way that half of all software is built, that would be really incredible.”
Iterate
Once Hsu collected enough information, he iterated quickly and moved on to the next hypothesis. Lather, rinse, repeat. Until — finally — he got to the right ICP.
- Target user. Through this process of iteration, the Retool team discovered that their target users were frontend and backend developers who work mainly in React or JavaScript. And their initial obstacle around getting engineers to use a drag-and-drop platform turned out to be irrelevant. “It turned out that these developers hate building internal tools more than they hate drag-and-drop systems,” says Hsu.
- Company size. After uncovering the massive market for internal tools, Hsu did some more digging and discovered that the companies with the most pressing needs were large corporations. “One of our early customers was a Fortune 250 company with around 120,000 employees, and they were spending $400 million building internal tools every year,” says Hsu.
Looking back, there were a lot of reasons why Shippo may not have worked. Chiefly, conventional startup wisdom might have said that while they had a great idea, the founders didn’t have the industry expertise to pull it off. As Laura Behrens Wu admits, they had no business trying to build a shipping company.
“People are so concerned with founder-market fit, but my co-founder Simon Kreuz and I for sure had no founder-market fit. This was our first time doing e-commerce and shipping — we were coming at it from a complete outsider’s perspective,” she says.
But instead of seeing their inexperience as a disadvantage, the Shippo founders harnessed it as a strength. It meant that they, a small business, would be able to approach their target audience (e-commerce SMBs) from a shared perspective. They didn’t try to create any optical illusions that made the tiny startup seem bigger than it was — they completely pulled back the curtain.
“When the two of us would take phone calls or respond to customer requests, we’d be very upfront about being an SMB ourselves,” she says. “We weren’t pretending to be a big company full of customer support people or product people. That made a difference in those conversations because people were willing to give us their time. And then the same people we built that relationship with were then also willing to leave reviews on the Shopify App Store.”
When you come at it from an industry outsider’s perspective, you’re able to think outside of the box. You’re able to think about how it should be, not how it’s always been.
MARKET, MODEL & MESSAGING:
“When I think back to the earliest stage of Plaid’s product-market fit journey, the challenge wasn’t finding a product that people would buy. It was creating a market around the product that we believed would be very important for the future, but was yet to be proven,” says co-founder Zach Perret.
“We started the company in 2012 and we launched the product to the public for the first time around 2014. And in that intervening period, we built the product in beta. We were focused on getting one bank live, then two banks live. When we launched we had something like 15 banks live — and that’s out of 12,000 total banks in the U.S. And so it was a really hard foundational first few years just to build out the product, get it actually into the market, get the first few customers on it and start to get them scaling,” he says.
“When we pivoted away from building a consumer budgeting tool to building a developer platform, I was surprised by how long it truly takes for a developer platform to grow. We have to not only build the product, we then have to sell it to customers, then they have to do an install, then their app has to gain traction,” he says. “Only then do you actually really gain value, if you’re charging based on usage like we do. And so the cycle from meeting a customer to getting paid a lot of money can be years,” he says.
“We believed that we had to convince people to build products in this market, and that was our job — more so than even building the platform itself. We knew that the platform was good, we knew that our product was something that people would want, if we could only convince people to go build financial technology startups,” he says.
Keep in mind, this was in 2012 — before fintech even had a name. “We would do all of these crazy things to try to convince people to build products in this area. For example, when we got our first-ever office, we started doing these monthly events called ‘Plaid Outs.’ It was a terrible name for an event,” Perret says. “We would invite everyone we knew who might possibly want to start a fintech company to come to our office and have beers. It eventually started to create this community, and we think that then inspired many people to actually go and build some products on top of Plaid.”
Although the journey was difficult, there was a payoff at launch. “We’d done so much market cultivation and development that we actually had a wait list of customers who wanted to use the product and we had to bring them on little by little,” he says. “We then used the fact that we had a waitlist to create this aura of exclusivity, and then people wanted to sign up even more.”
For a founding team to achieve startup success together just once in their lifetime is impressive. Twice is remarkable. Thrice? Practically unheard of. That’s part of what makes the story of Jessica McKellar, Waseem Daher and Jeff Arnold at Pilot so unique.
Well into their third business together, McKellar, Daher and Arnold have made the moves of seasoned multi-time founders. Here’s one PMF lesson they’d impart on budding founders: “If you plan to build an enduring company, one that can be independent for a long time, one that can go public, the number one thing you need is a market that’s large enough,” McKellar says.
“A lot of other things you can change after you’ve started, but you can’t change the size of the market. We’ve tackled smaller markets before. The market for businesses who care about rebootless kernel updates on Linux is a great market, but it’s not huge, which is why Ksplice was always going to end up being acquired. It’s just too niche a product to live on its own independently. When we started Pilot, we knew we wanted to tackle a really big market, something that could have legs indefinitely. We chose a problem that literally every business has. Bookkeeping is not a nice-to-have, it’s a must-have. And because of that, it’s an enormous market, and our business is resilient even amidst economic turbulence.”
Sometimes startups have a great customer and product, but aren’t framing it in a way that resonates with their target audience. The Ironclad team learned a valuable early lesson here.
“We started out as an AI legal assistant. Our website and all of our messaging was around that. But 100% of the time I had to explain what an AI legal assistant was,” co-founder Jason Boehmig says. “We had a [email protected] email on our site, and we didn’t get a lot of email, but I would still check it. And one day I got a message that said, ‘Hello, are you a CLM?’ It was just a one-liner. I was so close to hitting archive, but I looked at the domain and it was from someone at a publicly traded company. But what was a CLM?” he says.
Turns out it’s an AI legal assistant Contract Lifecycle Management platform that helps enterprise companies create and manage their legal contracts. “It’s this old school software category. But by that definition, yes, we were a CLM. So of course I wrote back, ‘Yes, we are definitely a CLM, we would love to come demo our CLM for you,’” says Boehmig.
“But we realized that while we were really great at creating contracts, we hadn’t put a lot of thought into how you deal with contracts afterward, which is the other half of contract lifecycle management. That functionality is called a repository in the CLM lexicon,” he says. “And so we had set up this demo with the legal team from this publicly traded company, and I turned to my co-founder Cai, and said, ‘By the way, we have three hours to build a repository.’ We took the train from San Francisco to San Jose and he built the first version of a repository, which we demoed live at the end of the train ride,” says Boehmig.
“This customer was in a CLM evaluation cycle that had 12 other CLMs solutions in it, but they loved the demo. So we went and actually built the full product, and we won, beating out all of these other CLMs. And after that, of course, we changed our messaging. We got serious about building CLM functionality and that’s our flagship product to this day.”
Sometimes you’ve just got to build it and see what happens, following the lead of that one customer who helps you define the space that you’re in. It was only by listening to a kind of random customer interaction that we stumbled upon the right positioning for Ironclad.
“We were able to win that deal not only because we built a repository, but we had this really exciting thing, workflows, which no CLMs had back then. As a founder, it’s important to think about if there’s something adjacent that you could add to your product that maybe you’re not that excited about, but would enable you to play in a different category and be very differentiated. It doesn’t mean you don’t get to build the exciting stuff, but that new framing can be a real accelerant to revenue.”
In the present day, Vercel is known as the category-defining frontend cloud behind open-source development framework Next.js. But that wasn’t the framing for the product in the early days, and founder Guillermo Rauch cautions other founders against trying to launch with brand-new messaging when storming onto the market.
In the early days, your priority should be to make your product relatable. If you’ve got a small team, only three landing pages and you’re kicking the tires on an earlier version of the product, giving yourself some very lofty tagline ends up playing against you because no one knows what you do yet, so they don’t understand.
“Today, I think Vercel has earned the right to try to define a category and adopt that lofty position as ‘frontend cloud,’ but in the early days, we had to be super specific and humble in our language. The team and I were laughing because we looked at earlier versions of the Vercel website the other day, and we’re a little bit embarrassed because we had oversimplified the product’s tagline in the hero image. I can’t remember exactly what it was, but imagine saying, like, ‘Faster websites, made easier.’ It was a very simplistic thing, but it was relatable for where we were, so it worked at the time.”
Don’t try to make everyone happy — stay simple while you prove yourself in the market. “The last thing an enterprise wants to hear is, “Oh, here’s a thing that does everything and promises it can solve every single one of your problems.” Buyers are just so tuned out of that narrative,” says Rauch.
While Lloyd Tabb was sure about what value he wanted to deliver with the early idea for Looker, he wasn’t certain of the right vehicle — so his early experimentation was centered on figuring that out. “For our first four customers, I had different ways of delivering what I was building, from pure consulting to a standalone product,” he says.
- Consulting: “Liftopia was an early customer that didn’t have a data person on their team. We treated this initial engagement as a consulting contract. When they needed something, they called. We were operating as a for-hire-data-team,” says Tabb. “We also did other consulting gigs where we helped customers move their data from a MongoDB database into an analytical one, and while that worked, it wasn’t nearly as good.”
- Stand-alone product: “With another early customer, the buyer was very familiar with the database marketplace and tools, so he was a great person to just hand the software over to and let him try on his own,” says Tabb. “It worked well — they were still a customer when we were acquired in 2019 actually — but we saw that this self-serve approach led him to miss a lot of the value that we’d captured with other customers.”
- Combination. “Another one of our early customers was SimplyHired. We tried a consulting engagement with them at first because the product was so early that it wasn’t baked enough to actually have anyone use it. So I had to go in there and hook it up to their data and teach their engineers how to program in LookML by sitting next to them,” says Tabb. “Eventually they were up and running, and as we added other features, they were able to use the product on their own.”
What ended up working best was part product, part service. “The problem with just giving someone the software was that they didn’t get as much value out of it. I realized I needed to be teaching how to do data as well as delivering a product. We used the demo as a chance to build a proof of concept, so we didn’t have a dummy sales pitch version — we always asked the prospect for an actual dataset to play with,” says Tabb.
“Then it was a very quick forward-deploy. We would come in and do a free trial where we would set up the software and teach them how to use it. And then we would watch for engagement. Only when there was engagement would we close the deal. We had almost no early churn because we only sold customers who got the value out of it. We had a better than 75% close rate on trials.”
You need to work double time to demonstrate value very quickly pre-sales. If you can prove value early on, then the money will always show up in your bank account later.
Founder Kate Ryder had spent months validating her idea for Maven, a telemedicine clinic geared towards women and families. She and her team painstakingly recruited and vetted the practitioners who would join the platform, including OB-GYNs, doulas, midwives, and nutritionists. Eventually, Maven launched the virtual clinic in April 2015 with 300 providers. And while Ryder and the team set their sights on a flood of traffic and booked appointments on launch day, that wasn’t quite what happened.
“At the time, we were one of the first apps to be built with Swift, an iOS programming language that Apple developed. Talking to folks on the Apple side, they were definitely winking that they would feature us in the App Store on our launch day. I remember writing to all the providers that they should prepare to open up their schedules because there was going to be a huge influx of patients coming from this Apple feature,” says Ryder. “But Apple didn’t actually end up featuring Maven. I think on launch day we got one doula appointment from someone who had read about us on TechCrunch.”
It turned out that changing consumer behavior when telemedicine was just entering the parlance was a tricky needle to thread. “This was 2015. Talking to a doctor over FaceTime was much newer and weirder at the time,” says Ryder.
Her advice to other founders? Don’t get deterred, and do the things that don’t scale. To generate more user signups, the Maven team encouraged providers to jump into the consumer Maven community and answer questions that folks were posing to the group, which pushed some of those community users to sign up for the digital clinic and access more expertise. Ryder and team also pounded the pavement. “We would stand in a park and try to sign consumers up with field marketing. We’d hire a bunch of interns to go canvas the city and try to get eight appointments. We set up a table at the New York Marathon. It was a grind,” remembers Ryder.
This also gave Ryder the push she needed to start selling Maven to employers as a benefit for employees — which, fast forward to today, now counts more than half of the Fortune 15 as customers.
Startups are incredibly hard work and they require grit. The thing that gets you through those tough moments is a deep commitment and belief in the mission and solving the problem.
