As a management consultant, entrepreneurs frequently come to me before they’ve even determined whether their idea is something that consumers would be ready to pay for in order to get my assistance in creating excellent go-to-market and growth strategies. During the era of growth at all costs and blitzscaling, when new venture capital (VC) firms were loaded down with cash and eager to take chances on companies that hadn’t even proven the product-market fit of their core offering, many startups managed to get away with taking this risky approach. But those are the past times now.
Even though VC new venture funding for AI-related businesses surged in 2023, it was at its lowest point since 2018. A lot of founders are having to accomplish more with less as investors become more picky. This indicates that tenacious business owners are either realizing that bootstrapping is the greatest option because it allows them to launch their ventures without the risk of venture capital investment, or they are using it as a last resort.
Global venture transaction dollar volume increased from over $150 billion in 2014 to over $600 billion in 2021, as depicted in a bar chart; in 2023, it was slightly less than $300 billion, which was comparable to 2019. The chart is divided into four categories: technology growth, early stage, late stage, and angel/seed.
The worldwide venture transaction dollar volume has returned to 2019 levels following a significant peak in 2021, suggesting a marked slowdown in new venture investing at all stages.
Founders who choose to go it alone must exercise discipline from the start because their funds are at stake. When taking a solo strategy, business owners are forced to strictly control expenses and concentrate on sustainable organic growth, sometimes passing up chances for inorganic growth that new venture VC-funded firms would not hesitate to take advantage of.
Although bootstrapping gives creators greater independence, it also necessitates greater financial discipline. These entrepreneurs can first ensure that their product or service truly solves a problem that a sizable enough consumer base is prepared to pay to solve since they won’t have investors to please. Nobody can afford to become the next Juicero, a company that failed mostly due to customers realizing they could squeeze juice packets with their hands just as easily as with a $400 Wi-Fi-connected equipment.
Rather than focusing solely on expansion, aspiring business owners should prioritize methodical, verified learning to enhance their primary product and attain optimal product-market fit.
To accomplish it, you don’t require a complex go-to-market strategy. VC new venture investment is not required. All you have to do is get going. I demonstrate how in this article.
Expand on Your Primary Product
Every new company begins with a leap of faith—basically, an educated guess—that the good or service meets a market need. However, the next step ought to be to support that belief with facts, and before you take any further action, ensure that your core offering has traction and the appropriate unit economics.
I used to work with an entrepreneur who wanted to assist big marketing agencies’ development teams in creating visually appealing and well-organized multipage websites. As a freelancer, he was frequently recruite to produce these. And he was aware from firsthand experience that this was an issue in this sector that needed to be resolved.
His top goal when I first met him was to develop a five-year strategy. But he wasn’t quite sure what he was selling or to whom.
He was undecided on whether to go with a project-based business plan. A paid service for agency-use WordPress plugin access, or a hybrid of the two. Furthermore, he had not determined who the potential client was within the organization. Let alone how to tailor his proposal to suit their needs.
It was obvious that my customer, or any entrepreneur at this point, wasn’t prepare for a long-term strategy. Rather, I assisted him in determining the precise nature of his main offering by using Alex Hormozi’s $100 Million Offer architecture. There are various methods to define a core offering. Hormozi’s strategy is to maximize the value that your core offering is considered to have by your clients by determining what their ideal outcome is, ensuring that it is likely to be achieved, and requiring the least amount of time and effort possible. This strategy appeals to me because it is straightforward: People are prepared to spend a lot of money on a service that successfully and efficiently addresses their particular needs.
Value is expressed as an algebraic formula that looks like this: value is equal to dream outcome times the anticipated likelihood of achievement divided by delay in time times effort and sacrifice.
The most alluring core offers guarantee results with the least amount of work and time.
Together with my client, I used this framework to list:
The issues he sought to resolve.
Every challenge the client may encounter along the process.
How those challenges could lead to answers.
How he was going to give those answers?
Then, we rejected any offers that would be too costly, too complicated to complete, or too challenging to market.
Test, Learn, Refine
Typically, I advise business owners to begin by developing a minimal viable product (MVP). A notion that should be recognizable to anyone who has spent any time in the IT community. This is a low-cost, low-effort (but practical and appealing) prototype used to gauge the viability of your concept. This isn’t the time to fully develop your ultimate product idea. Even if you have a clear idea of what you think it should look like. You never know when your customers will actually desire something slightly—or significantly—different.
Rather, focus on the primary benefit that your product or service would bring. Then develop an offering as fast and affordably as you can. If taken too far, you don’t need to know how to code and shouldn’t spend money validating an idea. Search for a low-code or no-code solution instead. For instance, you don’t have to develop and test an app from the beginning if your offering is a short-term apartment exchange business. Instead, you could start a Skool community or Facebook group. Or even simply a shared spreadsheet that you spread the word about on social media.
Dropbox gained notoriety for validating its main concept with a short, three-minute demo film that it uploaded to Y Combinator’s Hacker News. The video garnered fast, insightful comments, and a year or so later, Dropbox launched the beta on Digg. The waiting list nearly instantly increased by a factor of fifteen as a result.
The creator of Dropbox, Drew Houston, discusses the value of MVPs, verified learning, audience communication, and product-market fit in this presentation slide. Dropbox used a fairly low-tech method to test its idea. A three-minute film that demonstrate how the product was intend to operate.
You can identify exactly what problem you want your product or service to solve.
As well as potential pain points or regions of unmet demand. By simply verifying your idea and listening to client input. It might even show that your idea isn’t that great after all. In which case you should have enough information to improve the following iteration. It isn’t until you’ve exhausted all of your manual or semi-automated options. You should start developing a more comprehensive service.
Know Your Customers
One technique to identify your target is through market research. But unless you start making sales to them, you won’t know who your clients are. Gretta van Riel, an Australian entrepreneur, advises conducting small-scale experiments with roughly thirty social media influencers who embody your primary target consumer personas. And observing which ones yield the most conversion success. It may surprise you to learn about your new e-commerce product. Which you introduced for Gen Z teens, is more well-liked by their Gen X mothers.
Market research is one way to find your target. But you won’t truly know who your customers are until you start selling to them. Australian businesswoman Gretta van Riel suggests running small-scale tests with about thirty social media influencers. Who represents your main target customer profiles and see which ones convert the best? The fact that your new e-commerce product. Which you created for Gen Z teens, is more popular with their Gen X mothers than with them may surprise you.
In this instance, we sought new venture to validate certain presumptions regarding the age, gender, and trade habits of the company’s clientele. We leveraged the CEO’s social media presence to poll thousands of individuals online and tested. This last trait with a targeted offer in one of our marketing campaigns. One of our conclusions was that the most difficult problems were also the most well-liked. Which helped the business better target those higher-volume traders. The company increased its ad spend revenue and reduced its client acquisition cost by 70%. In addition to optimizing its marketing funnel by identifying which customers to target.
Conclusion
Many of the young entrepreneurs I’ve encountered are capable of starting their businesses on a weekend. But they are paralyze by analysis and become down in planning and research. All you have to do is find the easiest method to validate the notion that germinates into an idea. Perhaps all you need to do is acquire the opinion of a few friends or individuals in your network by calling them and then taking it from there. They could even end up being your initial clients.
