In The Titanic Effect: Successfully Navigating the Uncertainties that Sink Most Startups, our goal is to help startups steer around hidden debts, or debtbergs, on their path to success. These debtbergs arise because there are decisions startups have to make where the best possible path is uncertain. And, the consequences of these choices are like icebergs in that they are only partially visible. In the book, we detail 33 different debtbergs a startup might encounter, across the four Oceans of Human, Marketing, Technical and Strategy choices. As we’ve started using these materials with different audiences, we’ve recognized that the biggest, most dangerous debtbergs vary based on the stage of the startup. So, this blogpost and the next three detail the biggest debtbergs to manage at each stage of a startup.
As a reminder, we suggest there are several general stages for startups: Pre-Revenue, MVP, Growth and Scaling. At the Pre-Revenue stage, the startup is not actually selling anything yet. It is early in concept development. This is sometimes called the ideation phase. At this point, there typically is a founder with an idea that she is trying to finetune, but has no paying customers or investors yet.
So, let’s look at the biggest debtberg for each of the four Oceans:
Human– During this stage, founders usually start recruiting others to help them – part-time employees, independent contractors, advisors and possibly even co- founders. You want to avoid the Inequitable Equity debtberg here, where too much equity is allocated too early. Instead, you need a plan to have equity get allocated and earned over time, based on contribution.
Marketing– The key to success in the pre-revenue stage is to hone in on the perfect target customer. Different segments of customers will want different solutions to their problems. So, you have to figure out which segment needs your solution the most and focus only on them, to avoid the Poor Prioritization debtberg. Effective targeting is the goal now – check out the video in our previous blogpost.
Technical– It’s tempting to plunge right into building out a beautiful product from your idea. But, it’s too early to invest dollars in a beautiful product when you haven’t yet established proof of concept. Instead, you want to avoid the debtberg of Unnecessary Solution by building a low-fidelity version of the product and see how customers respond. Duct-tape and cardboard are your friend right now.
Strategy– Because discovering product/market fit is so critical now, there is a tendency to overinvest in product development at the expense of the other domains. Try to avoid the Lack of Coordination debtberg by making sure that ideas from the Technical Ocean are communicated and coordinated with the Marketing and Human Oceans. Take ideas that evolve in product development and flesh them out from the marketing and human perspective. Don’t move too far in one dimension without bringing the other dimensions up to speed.
Remember, taking on hidden debts is not a bad thing. It’s probably even necessary as you make decisions under uncertainty. But, these tips can help you consider the consequences that might not be visible on the surface.