Founder-Problem Fit, as defined by Roelof Botha, partner at Sequoia, is a situation where the founder is fully committed to solving a hard problem. So much so that the founder can overcome any obstacle to make her/his idea work, nonetheless of the struggle required.
Breaking down Founder-Problem Fit
When it comes to disruptive business models, the more you try to solve a very hard problem, the more it requires a willingness to go through hard times, uncertainty, and survival threats for your startup.
This is not for everyone.
That is also why founders are so celebrated; if they weren’t, things would be even harder.
In short, the fame and attention that you get as a founder might attract some narcissists, of course, but overall also enables more people to build people and become entrepreneurs.
Only in the last decades the figure of the entrepreneur has become central to the public discourse.
So for this newsletter issue, I’d like to ponder a concept based on the personal ability of the founder to keep going, also when everything seems broken and falling apart (which is the norm in Startupland).
Thus, when looking at companies with potential, it’s critical to look at something called Founder-Problem Fit!
As I was listening to the podcast interview by Tim Ferris with Roelof Botha, the partner at Sequoia Capital, Tim Ferris asked what some of the defining characteristics Sequoia has identified over the years about successful founders.
Roelof Botha’s reply was enlightening!
Here you go:
“It starts with an authentic identification with a problem.
I think when that founding inspiration because if you’re trying to start a business for the sake of starting a business, it’s so hard; there are so many challenges on the way to building a successful company.
If you’re doing it for the wrong reasons, you’re going to wilt, you simply won’t persevere.
But if you’re deeply motivated by what you’re doing, you’ll keep going, and you’ll overcome obstacle after obstacle and so that, to me, is one of the key starting conditions.
It is founder-problem fit!”
Roelof Botha continued:
“I love asking a founder, and I meet them like how did you come up with this idea?
Like, what was the eureka moment where something snapped, and you want to do to address this problem?
And what is about the current solutions that you must have evaluated that frustrated you and that you didn’t think was good enough?
And then the next one is: what’s your unique and compelling value proposition so having evaluated alternatives?
And deciding to build something, why do you think what you’re building is so distinct that it has a chance of flourishing and becoming a real business?”
Roelof Botha explained it with a story:
“There’s a founder Matt Rabinowitz he and I met in high school in South Africa in 1987 at a nerd camp.
It was actually called an academic vacation school, but I mean, that’s just a very nice way of saying.
And he’s absolutely brilliant he was a gold medalist in a national science olympiad, he came to Stanford, he studied physics and electrical engineering.
And in 2002, his sister had a baby that died within a week of birth, and he was shocked at the state of prenatal testing, and he went back to Stanford, and he learned everything he could about biology and genetics and started this company in Natera!
I’m still on the board 15 years later, we made a million-dollar seed investment in him in 2006 as just an idea, and today, they deliver millions of tests to help people have healthy families.
But it started with an incredibly authentic inspiration for him which is seeing what his sister had to deal with!”
That is what Founder-Problem Fit stands for!
Read Next: Problem-Solution Fit, Problem-Market Fit.
FourWeekMBA Business Toolbox
Tech Business Model Template
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
Web3 Business Model Template
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
Asymmetric Business Models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
Business Competition
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological Modeling
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
Transitional Business Models
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.
Minimum Viable Audience
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.
Business Scaling
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.
Market Expansion Theory
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.
Speed-Reversibility
Asymmetric Betting
Growth Matrix
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
Revenue Streams Matrix
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.
Revenue Modeling
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.
Pricing Strategies
A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.
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