In startup land, we all make leaps of faith. I think it’s part of being an entrepreneur – you need to have just enough confidence, startup swagger and insanity to jump … and figure it out before you crash. And I don’t think leaps of faith ever completely go away, even if you follow a rigorous Lean Startup and customer development approach. Sometimes, you go with your gut and run (or fall … or both.)
But too many leaps of faith and things start to fall apart. There are “educated guesses” and “plain old we have no fucking clue” type guesses; the former being the ones you can reasonably make from time to time.
When pitching investors, you have to demonstrate enough logical thinking to fill the gaps between your leaps of faith. Here’s a classic example:
Entrepreneur pitching says, “When we have a lot of users, we can do X and Y which is how we make money.”
The first huge leap of faith is “getting lots of users.” The second leap of faith is that “people will care about X and Y.” An investor (or anyone for that matter) will immediately ask, “How are you going to get a lot of users?”
You probably don’t have all the answers, and there’s definitely some uncertainty here, but this is the exact moment where an investor (or customer, partner, etc.) decides whether you’ve got what it takes to succeed. If you gloss over the leap, you fail. If you stumble over the leap, you fail. You don’t need to provide a thousand ideas, or ultra-detailed strategies, but you need to demonstrate enough competency that you can fill in the unknowns intelligently. Incidentally, this is where Lean Startup and customer development can really help. Imagine answering this question as follows:
We have some strategies we want to implement for user acquisition. Based on our research of the market, and speaking to prospects, we’ve found that most of them spend significant time on Facebook. So we’re going to test Facebook advertising (or we already have and we’ve seen good, early results) and put a fair amount of emphasis on our Facebook profile. We’re also making sure we use Facebook Connect for people to signup. Our next experiment will be [fill in the blank] because [fill in the blank] and we’ll measure the efficacy in number of signups, and then in terms of active users, defined by [fill in the blank].
Maybe your experiments will work, maybe they won’t. But at least you have some! And there’s some reason and thought behind the leaps.
I’m using an investor pitch as an example of when the leaps of faith you’re making will come into serious question. But way before you get to pitching investors, you should be identifying the leaps of faith in your business model and plan, and figure out how to fill those gaps. Ash Maurya makes reference to this in a recent post, Build Your Startup Through Conversations. He describes a step before Customer Discovery, which he’s called Business Model Discovery. It gives you a chance to holistically tackle the business and bring in advisors to help with the process. The goal is to identify the “gotcha” spots in the plan and business model, and come up with hypotheses on how to solve them before investing in customer interviews, etc.
I’m all for leaps of faith. Customer development and Lean Startup aren’t meant to eradicate leaps of faith from startups completely, but they’re good processes for reducing risk and eliminating waste. Whether you use customer development or Lean Startup (or anything else for that matter), you have to have answers for the leaps you’re making. If you make them completely blind – you might land on the other side safely – but it’s more likely that you’ll fall to a very painful death.