I Almost Invested $100k and Cost Someone Their Career

For those who don’t know, I run a venture studio.

We work with early-stage founders, chosen not for their ideas or technical skills, but for their proximity to the problems they aim to solve.

In military terms, they are the "boots on the ground."

This means they have an in-depth understanding of a niche, are likely solving their own problems, and possibly are their own customers.

The Story

One of the founders we recently worked with is a skilled machine learning developer in the digital health space. Naturally, we appreciated the technical training, but it was access to an industry undergoing disruption that made us want to pursue this opportunity.

Our Program

Week 0

During this week, we workshop hypotheses and opportunity statements, informed by the founder's unique viewpoint, industry access, and general understanding of the space. Essentially, we aim to articulate the problem they have witnessed or experienced so it can inform the next steps.

Week 1

In this phase, we coach founders on tapping into their existing networks and conducting non-leading customer interviews. We scan for patterns in pain points and evaluate current solutions, potential gaps, etc. This is to validate whether the founder's hypothesis is valid and whether they're the only ones feeling the pain.

Week 2

After analyzing and distilling this information, we workshop a "pretotype" (not a prototype) tailored to the customer persona we identified. This is designed to be done as quickly and inexpensively as possible. I prefer pen and paper, but I'm not opposed to pixels and code.

Week 3

We're now ready to test the offering with the very people we previously interviewed. This is a straightforward process because we are potentially about to convert people from our existing network (who have opened up to us about their problems) into customers. More on this in a later article.

Back to the story

With everything going smoothly into Week 3, and feeling confident that the data gathered in real-world interviews was pointing to a promising solution, I decided to share our findings with a friend who happens to be a prominent figure in the space we were working on penetrating. I was mostly excited as I assumed our research was strong enough to have nailed the problem, persona, and that our proposed solution was clever enough to convert.

Pause

Remember, part of our due diligence is around founder expertise, not so much technical, but around their understanding of the problem they’re setting out to address. We very much invest in people's access and exposure to potentially untapped opportunities.

Back to the story, again

What quickly emerged was that some of the largest players in the space were already competing with highly integrated solutions, similar to what we had just manufactured. As a side effect of learning this, I realized that the core pain point and persona we identified in Week 0 were also imprecise. Our founder’s unique value proposition immediately became invalid.

Why did my validation loops produce different data?

One could blame research bias, and it's worth noting that founders are often so attached to their idea they might disregard feedback from customers. I'm not saying this is the case, but it is in most cases. Likely, it was due to varying seniority levels and the size of the companies interviewed. That’s why you must talk to as many people as possible.

Fact check: did I actually almost lose $100k and cost someone their career?

With very minimal time, and virtually no monetary investment, given our structure, we technically used this program as an active form of due diligence. It’s perhaps unorthodox but it saves us money, time, and sometimes people’s careers.

So, yes. We didn’t end up making a cash investment, which at the pre-seed stage can range from $25k to $100k. We instead guided a founder through due diligence and validation, all the while keeping them from burning out and becoming employed. The reality of these early-stage ventures is that they can drag on for months and years, with founders on the road pitching an unvalidated idea, raising money from friends and family, getting reverse mortgages on their homes, maxing out credit cards, taking leaps of faith, leaving promising careers, when all they had to do was simply talk to some people, likely in their backyard.

Minimum Viable Founders

While this particular founder didn’t end up getting the traction they hoped, they didn’t lose any of the skills they came in with; in fact, they gained some. They beta-tested being a founder and gathered a ton of data on their industry. With a bit more competitive analysis, perhaps by talking to a different persona and learning what solutions currently work well for them, and gaps in those solutions, the founder will be on their way to testing again in no time.

TLDR

• No matter how close you are to a problem, others in your space have different experiences and viewpoints.

• Talk to as many people as possible.

• Problems look different at different levels of the food chain and provide different interpretations.

• One month of part-time research is better than quitting your job and going into debt.

• Talking to people beats building products every time.