Gain Tempo Before Seeking Fundraise
Gain Tempo Before Seeking Fundraise
Challenge: Gaining initial momentum is a multi-front problem
The initial challenge of an early-stage startup is to create and keep momentum. Whether working on a SaaS product, a fintech app, or a marketplace, the team should deliver some features to a bunch of users, where you get feedback, preferably some payment, and then the team works on new features. Many widely known frameworks have had similar direction over two decades;
Lean Startup: Build-measure-learn loop with starting an MVP.
Agile: Developing products in small, incremental cycles to continuously test and refine features based on user feedback.
Steve Blank: Getting out of the building and talking to customers to validate assumptions and learn quickly.
Frameworks are abundant, but founders must figure out what to do. I have seen many startups, 3-4 years old, without a piece of momentum with received pre-seed or seed investment. Eventually, they are out of money, or confounders give up. Creating momentum is hard because the time is limited, and there is a multi-faceted problem with high uncertainty.
The problem has three natural pillars;
Team’s Missing skills
Hard Skills: The product could not be delivered properly due to missing skills like product design(MVP) or technical skills.
Soft Skills: For example, many founders are prone to confirmation bias and seek information supporting their initial vision. The team needs a critical thinker and devil’s advocate.
Users do not care: This is the law of nature. New products do not resonate with positive feedback because users generally lack urgency or find the product difficult to understand or use initially.
The product is not good: It is very hard to find dazzling product features in the first version. You improve bit by bit with many iterations.
Perspective: Tempo in Chess is a good analogy to think about
I think the momentum in a startup is similar to “tempo” in chess. The term "tempo" originates from the Italian word for "time" and is commonly used in various contexts to denote the pace or rhythm of an activity. In chess, gaining tempo is when you make a move that improves your position while at the same time forcing your opponent to make a defensive move he doesn't want to make but has to. So the result was that you improved your position, while your opponent had to waste a move to defend his/her position and not achieve any progress.
I am an amateur chess player, and remember my chess master friend advising, "Gain tempo in the game, do not overthink, make a decision, and move.”
In chess, you have no opponent for your startup, but other aspects are similar.
Complexity: In chess, the number of possible moves in any given position can be quite large, and this number grows exponentially as the game progresses. In your startup, in uncharted territory, every decision you make(not making a decision is a decision) impacts your position while your surroundings(users, technology, and competitors) constantly move.
Limited Time: You lose the chess game if your time runs out faster than your opponent. Your startup flops if you fail at the end of the limits of the runway budget.
No tempo, no win: To win a game, you must gain tempo at some point, whether at the beginning, middle, or end. If you do not, you will probably lose or draw. In a startup, you gain tempo when you ship a product, get feedback, learn something, then decide, change some features, and try again. This continues until your product’s success or your decision to stop your company.
Accelerators‘ main purpose is to help startups gain tempo. In a short time frame, mostly three months, they provide advisory services but, most importantly, push them to validate their value proposition or get their first paying customer. But again, it all depends on the team.
Advice: Develop your tempo sensor and take action
The initial action should be defining how to track your tempo. Revenue metrics, NPS, and CAC are inappropriate for the early stage. You should define your metrics and indicators in three pillars.
User: Understand and measure user engagement and satisfaction to ensure the product meets market needs.
Team: Track team efficiency, morale, and productivity to maintain high performance and alignment with goals.
Product: Monitor development progress, quality, and market fit to ensure continuous improvement and relevance.
Here is an example;
If you are losing tempo, at least one pillar has a problem you should address. The table below is an example of suggested actions.
Traction and fundraising are not related to gaining tempo
Investors’ beloved indicator, traction, is unrelated to gaining tempo for pre-seed startups. It is a later-stage indicator where a startup creates revenue and user engagement, which is meaningful for a seed round preparation.
If you fundraise from angels or VCs, it does not mean that you gained tempo. Because investors are not users, they can not validate the potential of your product. Only users can do it. If investors like you and your product, they can extend your runway via investing, which makes sense only if you have some gained tempo. That will create learning and make your product successful. If investors are experienced, they can provide valuable advice, too. Fundraising for a startup without tempo is a waste of time and money. First, you should resolve the missing pieces.
You may lose your tempo if you are distracted too much during fundraising. It is uncharted territory when founders meet with investors, draining significant effort.
If you have a tempo issue, observe your team and users and take action. Do not go for fundraising before gaining tempo and learning to keep.