Fall in Love with the Problem, Not the Solution

Entrepreneurs know that great passion for the products and company is necessary.

Falling in love with the problem means valuing the end user as the key to success, not even your own ideas and creations.

Steve Jobs used to quote Michelangelo that simplicity is the ultimate sophistication.

There are only right decisions or NO decisions. Because when you make a decision—when you choose a path—you don’t know what it would be like if you had chosen a different path. Making decisions with conviction is one of the most important behaviors of a successful CEO and, in particular, in a start-up.

I have not failed 700 times. I have not failed once. I have succeeded in proving that those 700 ways will not work. When I have eliminated the ways that will not work, I will find the way that will work. —Thomas Edison

Many of my start-ups began similarly—being frustrated and then realizing that others share the same frustration and trying to find a way to ease it.

For me, it is always frustration that leads into understanding there is a problem. Then I try to figure out if it is a BIG PROBLEM—a problem worth solving.

Start by thinking of a problem—a BIG problem—something that is worth solving, a problem that, if solved, will make the world a better place. Then ask yourself, who has this problem? Now, if the answer is just you, don’t even bother.

If many people have this problem, however, then go and speak to them to understand their perception of the problem. Only afterward, build the solution.

There are many reasons to start with the problem, in addition to increasing the likelihood of creating value. Another key reason: your story will be much simpler and more engaging; people understand the frustration and can connect to that. Companies that fall in love with the problem ask themselves every day: Are we making progress toward eliminating this problem?

The more you hear other people tell you their version of the problem, the more you know that people perceive the problem as real, which means the perception of your value proposition will be real.

If you solve a problem people face daily—and, if possible, a few times a day, like during their commute to the office and back—you are on to something big.

Problems fit into a matrix with two axes: Total Addressable Market and Pain. When thinking of a problem, look at this two-by-two matrix and ask yourself two questions: How big is the addressable market? How many people have this problem? How many businesses suffer from this issue? Then ask yourself the more important question: How painful is it? Pain can be measured by one or both of two factors: amplitude (really, really painful) or frequency (how often we suffer from it). Once you define your problem, go back to the matrix and see where it fits.

My biggest recurring frustrations are wastes of time, like waiting in line (at supermarkets, in traffic jams, at airport security, waiting for the lift at a ski resort), and wasting money. I hate it when I feel like I’m being ripped off.

Your passion for making a change must be greater than your fear of failure and the alternative cost. This is what I call the “entrepreneurship zone,” because not every person with a great idea has the personality to build a start-up.

If my passion is avoiding frustration at all costs, his passion was revenge.

Eventually, in order to be successful, you will need to know what makes people tick. In most cases, this is about their emotional engagement with the problem, and the actual perceived value is likely going to be different than the perceived value in your story. For now, you need to find a problem that makes you tick, a problem you can fall in love with.

It was as Michael Jordan once said: “I’ve never lost a game. I just ran out of time.”

If you’ve never failed, you’ve never tried anything new. —Albert Einstein

If we agree that this is a journey of failures, then the best way to increase your likelihood of figuring out what works is simply to try more things, and the best way to try more things is to try them out fast and to fail fast so you have enough time (and run rate) to try the next thing.

A pivot is not yet another experiment in your journey. It entails reconsidering the underlying assumption.

In the consumer services business, as I’ve mentioned, retention is the only indicator of PMF. If users are coming back, you are creating value. You can’t build a company if your retention sucks.

Listen to your users/customers and, particularly during the PMF phase, try to understand what doesn’t work for them. This user feedback is the only thing that allows you to move faster, and it is the only thing that matters. Even though we could glean pretty good measurements out of our system, if you don’t speak with users, you can easily figure out the “what,” but not the “why.” And in order to get to “good enough,” you need to understand the “why.”

If sometimes you tell yourself, “I should have done that differently,” right then is the best time to do it differently. If you tell yourself, “Next time… ,” guess what, next time is right now! TODAY IS THE FIRST DAY OF THE REST OF YOUR LIFE. It may be a cliché, but it’s nevertheless true, for your own private life and even more so for your start-up journey.

“How do you know when it is time to give up?” He thought for a second and then told me, “Never. Entrepreneurs will never give up.” I think he’s right, but I would add another point of view. If the problem disappears, then give up. If the team is not right and you’re unable to do anything to change it, then give up and restart.

The fear of failure is usually what limits our ability to make decisions. That’s why it’s so important not to be afraid to fail.

Failure is no badge of shame in the tech world. The opposite, in fact, is true: A second-time entrepreneur has a much greater probability of success, regardless of what happened the first time, so the experience in that sense is worth the increase in the probability.

Going through a journey of failures allows you to determine what to do by realizing what doesn’t work and in particular why it doesn’t work.

Remember, there’s only one metric for determining you’ve locked down your PMF: RETENTION. Everything else, like customers willing to pay and partnerships with third parties, all those are great, but if your customers don’t stick with you and don’t keep on using your product, that means you don’t create value for them, and that you will die.

There are four elements to increase your likelihood of getting to product-market fit: Fail fast so you have more time/runway for more experiments. Listen to your users. Focus on the problem. Make the hard decisions if needed.

The only way to make progress is by listening to your customers.

Your road map is essentially a list of experiments you are going to do until you find the one thing that works. Your go-to-market plan, user acquisition plan, and the vision for going global are all just experiments until you get each right. If you have twenty different features you’re considering, that means you will need to run twenty different experiments. And guess what: you will stop as soon as one thing does work.

Most entrepreneurs think that their product or app will need a lot of features. It’s the other way around: The more features you add, the more complexity you create.

Two elements make a start-up a success: pure luck and getting your experiments right. If you get them right on the first try, you can move faster. And luck is always helpful.

“The biggest enemy of ‘good enough’ is ‘perfect.’” Good enough is usually enough to win a market. Assume for a second that there is a good enough product in the market, which is measured by retention, so people are actually using it and are coming back. Now, you’re building a better product, a perfect product. Your biggest challenge is to convince people to switch. Most people won’t because what they currently have is good enough.

Disruption has little to do with technology. It’s about changing behavior and market equilibrium—that is, the way we do business.

To disrupt something, we need to tell ourselves that what we’re currently doing is wrong. For individuals, that’s difficult. So just imagine how hard it is for organizations. It’s usually impossible. No one likes to admit they’re wrong.

Here’s an even worse scenario: You already raised a pre-seed or seed round (first early investment), and you are working on PMF. You are not there yet, but you think you’re very close. You meet investors to raise your seed round, and they give you all sorts of input about the business model, competition, growth, and globalization, and you think that you need to satisfy their concerns. YOU DON’T!

If someone asks you about competition, you can name three to four potential competitors and why you’re different (not better but different).

A start-up, in order to be successful, needs to do one and only one thing right, and to increase the likelihood of doing so, it needs to say no to everything else. Focus is not only about what we are doing; it is about what we are not doing! These are the hard decisions to say no to.

Your start-up strategy always begins with product-market fit (PMF), and let me spell it out for you: If you figure out PMF, you get to live. If you don’t, you will die.

Can you figure out scale before figuring out PMF? Well, just imagine that you can bring millions of users, but your product does not create value for them. In that case, they will simply churn.

Can you figure out a business model before PMF? Not really. Even if you convince someone to pay for your product, if you subsequently don’t deliver consistent value, they will churn, cancel their payment, etc.

PMF is measured by one key metric: retention. Occasionally, you will have other key indicators, like monthly active users (MAU) or other usage metrics. During this phase you should focus all of your efforts on achieving value creation for your users; nothing else matters. Nearly nothing should be done on other fronts, like business development or marketing. The result is a very lean organization and a small budget. The entire road map of the product during this phase focuses on improving retention (and most likely conversion on the way to retention).

What’s more challenging is making sure that access to the value is simple enough. The fact that your product does X, Y, or Z doesn’t mean that your users can figure out how to do all that. The product may be too complex. Achieving simplicity will take iterations. You might have thought it would be a good idea to require registration before using the product. After all, you want to capture that user data for marketing and advertising purposes. But if you lose 50 percent of your users because they don’t know what they’re registering for, are not yet comfortable sharing their personal information (or any information), or simply because the process is long, you’ve not built a simple-to-use product.

If, for B2C businesses, the main metric is retention, for B2B it’s whether a customer is coming back to buy for a second time. That indicates increased engagement such as buying after a trial or renewal of the agreement for another period of time. This second engagement is a sign that you’ve figured out PMF. Renewals are the B2B equivalent of retention.

Frequency of use is so powerful for many reasons. One, if people are using your product often, it is obvious you’re creating value for them, and therefore you’re likely to have higher retention and a greater chance of figuring out PMF. Two, your growth is likely to be solved as well, because with word of mouth, every time someone uses the service, it is an opportunity for them to tell someone else about it.

If your frequency of use is low, however, then you’ll need to jump to the business model phase instead of growth. Why? You always need to acquire users. But you have no word of mouth. It will take you a long time to figure out growth, and you probably won’t have sufficient funding to get to that point.

To understand users, you have to start with the humble approach— you’re an amazing sample of ONE person.

When you’re telling stories, examples are key (they are authentic and emotional). When dealing with a large number of users, there is one thing to remember: normal distribution. Users are different; they don’t all fall into the same group or category. In fact, there are three relevant categories of users: innovators, early adopters, and the early majority. The biggest challenge is that a user from one category can’t even realize that there are other users that are not like them.

The gap between early adopters and the early majority is so huge and complex to cross, it is like a meeting between people from two different planets.

When you start your journey, most of your users are actually innovators or early adopters. So, you gather your product feedback from those users and your product becomes good enough for them. And then you get to the chasm, when you think your product is ready. This is where many users will fall off the cliff. You already believe you have figured out product-market fit and then, all of a sudden, it turns out that you haven’t. There is ONE and only one bridge for crossing this chasm: SIMPLICITY.

Self-exploration is an innovator or early adopter behavior, while “someone told me about the app” is an early majority’s profile.

“I thought it was valuable” is an early adopter answer, while “I had no other option” (like using the Tesla app or your bank’s mobile app) is an early majority’s answer.

The most common behavior of the early majority users who have downloaded the app is to do nothing. It’s a state of mind: “My life was good before I downloaded the app, and it will remain the same if I do nothing.”

The same is true when something doesn’t work. Innovators and early adopters will go back to YouTube or Google to find out what to do or to try to overcome the issue. The early majority, on the other hand, will churn.

Think of an app’s settings. If you are an early adopter or an innovator, you will get there pretty quickly, but it is not for the early majority, unless they have to do that.

It’s exactly the opposite when a new version comes out. While early adopters and innovators are all excited, the early majority hates it. It means a change for them, and they hate change.

You must understand users in different geographies in order to know where to go in your GTM (go-to-market) global plan. A cultural gap should define your GTM plan and your product. Think of the following geographic differences: How good is good enough? Social and social+ behavior Gig and the sharing economy Trust in general and trust in government or brands Safety and perception of safety Inclusion Small or large in terms of population Wealth (GDP per capita will be the best way to compare that)

That’s the state of mind of an early majority user—if it is just a little complex, we simply give up.

The first rule of complexity is more = less. More features means more complexity, and therefore it’s harder for users to adapt and likely results in less active users.

You want the app to be simple, the back-end must be complex and perform a lot of work behind the scenes in order to keep the user side simple.

The attitude of product leads who say “We know better than the users” simply doesn’t work.

If you want people to use your product, there are no shortcuts. You will need to watch the users.

In the early months after the release of your product, most of your users will be new. For them, what seems obvious or simple for us as the app’s creators is not the case—they are new.

While your product looks to be at product-market fit, it is PMF for early adopters. It is still not a fit for the early majority. Once you start to get early majority users, you will need to go back into the process of making the app good enough for them.

The early adopters will have much higher conversion and retention rates, so the metrics might get biased. Therefore, you should do two things with early adopters: Measure them separately. Have separate cohort measurements. If you’re not sure how to distinguish them, keep first-year users completely separate from the rest. Always bring in early majority users as soon as possible to gather feedback. Recall that they are not going to show up by themselves; you will need to encourage them to try your product.

PMF is all about value creation. If you create value, you will succeed. If you create great value for many people, you will be very successful. If you don’t create value, you will die.

There are, of course, some differences between consumer apps (B2C) and business-to-business services (B2B), but the essence remains the same. If users are coming back, it means you’re creating value. In B2C, this is pure retention, which means we calculate how many of those who first used the product this month will return to it three months down the road. In B2B, it is about the customer buying more, which means renewing their annual contract or expanding its engagement and coverage. B2B is about the same customer buying more, not a new customer buying for the first time.

We mislead ourselves because of a few main reasons: You hear the feedback from prospective users, leading you to confirm that the nature of the beast (the problem) and the conceptual solution are correct. You already took into consideration the next fix or version that you know is coming and so, in your mind, you are 100 percent sure that this change will make the difference. You think of the future version of the product as if it has already delivered the results. You mainly listen to active and retained users who confirm your point of view, and you do not listen to those who “churned” (left your platform or product).

There are clear measures that will tell you if you are at PMF or not, and the even better news is that there is a process that will bring you there. The metrics are very simple. There are only two of them: Conversion—measures the percentage of first-time users who were able to obtain value from the product (i.e., use the main function of the service/app). Retention—the percentage of users who kept on using the product over time.

There are a few other metrics that will eventually tell you similar things. MAU (monthly active users) is one and NPS (net promotion score) is another. NPS reflects the percentage of people who would recommend (or not recommend) your app/system. With both these measures, you will get a similar POV, but if you are looking for the number of users or the app’s score on the various app stores, they can be misleading. They show either the efficiency of the marketing machine in the case of MAU, or how happy the retained users are in the case of NPS. App store score and the number of users don’t help you improve your product. Your journey to PMF is about increasing the conversion and retention numbers and not just measuring them.

PMF is not about a gut feeling. It is about numbers.

How do you get to high retention? There are two main things to consider: the funnel of users first-time users See the figure below. At the top of the funnel is the total addressable market—that is, all the users. At the bottom of the funnel are “retained users”—those users who are coming back.

If your service requires registration, then the phase of registration becomes a gate or a roadblock because there will be users who simply don’t register. If registration is mandatory at this phase, then you just lost that particular user. If there are many of those types of users, then this barrier becomes very significant. In many cases, I would recommend postponing registration until after some value is obtained. If you require additional interactions before getting to the expected value, each interaction is a gate, for which you have one critical measure—the percentage of users who fail to get through this gate.

There are three main types of barriers from the user’s perspective: understanding what your app or service does getting to the value deciding if there is enough value in it

The funnel of users is a method, but to make the most out of it, you need to master two things: The metrics—This is basically an accurate and consistent measurement of each one of the gates over time. This is how you know where to focus your efforts to improve, and determine whether or not you are improving. The learning—In order to understand why this is a barrier (you know it is because you just measured it), you need to speak to users who failed at this gate and ask them one very simple question: Why? There is no one else in the world who can tell you that. Active or retained users don’t have an issue with this particular gate and therefore they don’t know how to answer the question. You or your product lead don’t know either; after all, if you had known, it wouldn’t be a gate. So, all of a sudden, when you are in the iterations of PMF, the most important person in the world is the one who failed. Only that person can reveal to you the secret: the why. Because this learning is critical, I would say that everyone in the organization must understand the issues and, in particular, understand the users. If everyone is not feasible, I would start with CEO, CTO, product manager, and the rest of the management team, followed by those in product development.

The journey to PMF is similar: Don’t be afraid to piss off your users; you will make faster progress towards PMF that way.

Product wise, you have four ways to deal with a barrier: Remove it or move the gate to a later stage in the user experience. Users are much more willing to register, for example, after they see the value and hopefully understand why registration is needed. Simplify it. Let’s say registration requires four steps. You can either have all of the steps appear on a single page or have a progress bar, but having four screens without a progress bar means that the user faces the unknown until they are done. And there is nothing like uncertainty to push users away. Copy (and microcopy). “Better” frequently is “fewer.” If you think because you have seven pages of guidelines therefore users should understand, let me ask you the following: When you get a new version of a product, and there are seven swipes you need to do in order to continue, what do you do? I will tell you what most people are doing: If this product is mandatory for you, simply swipe swiftly seven times without reading a word. If, however, you are a new user and this is your first time using the app, and it is not a mandatory app, most likely you will give up. Make use of visual language. This point has a lesser impact but is still very important. Product designers can influence decision-making through interface design that directs the user. For instance, critical information and call-for-action buttons should be designed to emphasize the preferred action you want your users to take, such as registering or completing a purchase. If you have a yes and no button both in the same color, or the yes button is in green and the no button has no color at all, most users will choose yes. Choices of color, size of text, and placement of buttons are very valuable for increasing conversion and getting better results.

One of the conclusions you’re likely to reach is that your product is too loaded with features and that less is actually more. Fewer features mean better usability.

Most consumer apps have what’s known as the “three uses” rule: If someone uses the product three times, they are very likely to remain engaged, so conversion happens within three uses.

Now, think of the features that, if they were removed, would stop you from using Waze. These are the critical features. A critical feature is one that: dramatically improves usage, conversion, or retention enables a new total addressable market (e.g., language or support of the iPhone in addition to Android) results in a lot of people complaining if you remove it Each one of the features developed needs to comply with one (or more) of the three bullets above, and you need to measure it. If the feature doesn’t comply, you simply don’t need it, and it will be a waste of time to build it before you figure out PMF.

One of the best ways to figure out if a feature is needed is to remove it and see if people scream.

When you add something to the settings, the main question is: “What’s the default?”

The product road map is a list of experiments that you conduct until you find the one thing that does work and then you move into the next phase of building your start-up.

Many entrepreneurs think of adopting a gamification model and are surprised and disappointed when they discover that it often doesn’t work.

Most users didn’t care about gamification. But those who did, cared a lot.

The feature was good enough, but the product wasn’t yet.

Here’s the rule of thumb about conversion: It takes three times to convert, so a user, after using your app or service three times, is much more likely to remain active versus those who have tried only once or twice.

Your journey to figuring out PMF is to start with any level of readiness and improve on two main issues: conversion and retention. How do you do that? Simply watch new users and ask those who fail why. So, to an extent, the only metric you need is the funnel efficiency, and the only road map is what makes it better.

While we already established the “operate in phases” approach, and that before reaching PMF there is nothing that you should do, there are two exceptions. If you expect your customers to pay for your app or product, PMF is measured by the renewal of payment by the customer. So, figuring out the business model happens concurrently with the PMF. You will need a business model and a business plan to raise money, even for a seed round.

The question of “how much” your customers will be willing to pay is a very interesting one; the real answer depends on the value you create. If you create a value of X, you should be getting something in the range of 10 to 25 percent of X. If X is just a one-time event (a paid download, for example), then you should be getting a one-time fee of 10 to 25 percent of X. If the value of X is created constantly, however, you should be getting that amount annually (or periodically).

There are three business models for consumer apps. Paid app—These come in different flavors and colors (e.g., one-time acquisition fee, in-app purchases), which basically say that you create value for the user and the user pays for it, either one time or occasionally (most games are like this), via subscription (Netflix, NBA, your local newspaper) or pay per use (Uber, Fibo, Refundit). This model might have another flavor, freemium, which is where the basic package is free and a higher-value package has a premium fee associated with it (Spotify). If your users are willing to pay, this usually generates the highest expected revenues.

Selling data—This is where you sell to a third party the data derivative of the app. When you have a winner and a free app, which means a lot of users and, in particular, high frequency of use, this model allows you to sell the data to third parties and charge them according to a B2B model.

Advertising—This model applies only if you have a lot of users, high frequency of use, and high duration of use or intent. For most startups, this is going to be the longest desert, mainly because you need to figure out PMF, and then growth, and only then you can validate your model, as you need the basic relevance for the content advertiser (that is, many users).

Probably the most common and preferred business model in B2B is SaaS, which means you provide your app/system/solution/platform or whatever as a turnkey service and you charge monthly or annual fees. There are many flavors of these periodic fees. It could simply be a monthly flat fee, a fee per seat, a price per user within the customer, per usage, or value. All of these options are good. The most important thing in this model is the recurrence; once the customer is satisfied with the value you bring, the churn will be very low, and these revenues will continue nearly forever.

Most of the B2B business models will translate into one of two options: Our product helps you save money. Our product helps you make money.

The saving-money value proposition is easier to sell and also easier to prove, and you can easily adjust the business model to fit. You may get a relatively higher share of the savings, but it is limited by the total spent.

What about making money? Here, the sky is the limit. So, for the same offering, if you can tell customers that they can utilize their underutilized capacity and make money based on that, well, that is much more appealing to most potential clients.

If you can choose which story to tell—making money or saving money— always opt for making money. Since the state of mind of saving money is that the floor is the maximum you can do, but in making money, the sky is the limit, customers will feel more empowered with this value proposition.

When you’re in the PMF phase, once you figure out the product, it doesn’t change anymore. That’s not the same for the business model journey. Once you find something that works, you should try to grow it. It is also possible there is another business model that is even better and bigger.

Building a start-up is not easy, you know that, and getting to PMF is really hard. But figuring out a business model is, in some respects, even harder. Sales are the hardest part of all. The reason this part is hard is because of the long gap between the validation of one thesis and another. Say that you are a B2B start-up and your business model is a monthly SaaS subscription. Your customer likes the story and says, “Let’s give it a try. Can you do a pilot or a trial here?” You want to believe that “this is it,” but there is still a long journey ahead of you. The trial may take a few months and may require numerous product iterations until it delivers actual value to the customer. Only then do the negotiations start. From first engagement into a deal may take many months, and yet we know that only a renewal is the “done deal” part. After the first customer, you expect the second and third customers to be exactly the same, but it turns out that they are not. They might have different requirements and nuances and, in particular, they might have different perceptions of the value and, therefore, may require another business model. As a result, you have very few customers and more than one business model!

The business model journey ends when a few things come together: the story, the value, and the renewal. If the story is simple, most customers will say it is interesting and relevant for them. It also means that salespeople can tell that story to prospective customers and they will see similar responses. Value means your product delivers the perceived value that you described in your story. Renewal is when a customer renews his or her annual deal. This is the clearest indication that you are delivering value and customers are willing to pay. It is the ultimate validation of your product and business model.

Just as you learned about PMF—that you’re not there until customers renew—the same applies to the business model. Renewal means that there is value and that the business model is right. While it is possible there is a better business model, or even the same one but with a higher price tag, those calibrations can and should happen when you have more customers.

When you start your customer sales, you should focus your efforts on three elements: The success of the customers. You may want to hire staff dedicated to customer success or even assign the product leader to it. Measuring everything so you know how to align the product or the story or the sales toolkit. Avoiding the temptation to sell more and more before you see renewals. Otherwise, it could lead to a crisis with multiple customers, and you want to contain that crisis to fewer customers. This point is probably the most critical one of the three I listed here. At this phase, the function of customer success is even more important than bringing in new customers. Once you see renewals of about 80 to 90 percent, this is the time to start building up the sales organization.

There are four key takeaways from this chapter: Figuring out a business model is yet another journey of failures— and a long one—but this journey, in particular, is more frustrating because of the large amount of time between iterations. At the end of the day, once you create value, your derivative of this value should be anywhere between 10 and 25 percent. In order to accelerate this journey, start by quantifying and qualifying the value you create. Then, adjust the business model and price level to its 10 to 25 percent derivative. If you have a choice in your business model, choose the one with recurring revenues.

Growth is not about a single event. It is about consistency in the results and the ability to demonstrate growth over time. Your GTM (go-to-market) plan will need to deliver replicable results and increase efficiency over time.

Once you start, you will be expected to grow 10x, 5x, 4x, 3x, and 2x in the next five years. To put things in perspective, let’s say that when you start (year zero) you have 50,000 users. A year later, you are expected to end up with a total of 500,000. At the end of this five-year period, you should have 10 × 5 × 4 × 3 × 2 × 50,000 = 60 million users—this is what unicorn growth looks like.

If you’re a B2B business and you’re selling $1 million in the first year, in the next year you will need to be at 5x that, and then 3–4x, and then 3x, and then 2–3x, and then 2x. So, $1 million in year zero will look like $180 million to $360 million five years later.

If you are a B2C start-up, then you should start your go-to-market journey as soon as you figure out PMF, but not before. The reason is very simple: If your product is not there yet, your churn is going to be high (and retention will be low). So, if you bring new users, most (if not all of them) will leave. Just imagine a colander that you need to fill with water. To be successful, you need to either move really fast, or seal the holes before you fill it with water. Sealing the “drainer” holes is PMF.

In B2B, however, PMF and business model are not that separate. Growth will start once you figure out the business model and PMF.

If you are creating a consumer-focused app and your total addressable market is large, at the end of the day, you will win if you figure out WOM. Unfortunately, WOM is only relevant for apps that are used with high frequency. Let me explain why. As we learned in chapter 4, if your product is used more than a few times a month on average (say, even ten times a month but not every day), then WOM is your path, simply because people have more opportunities to tell someone else. Now, imagine that only 10 percent of your users will ever tell someone else about your product after they use it, and then 10 percent of those who are told will eventually become users.

WOM is a derivative of frequency of use. High frequency of use means you will end up with WOM marketing. All other GTM activities that take place beforehand are a means to get to critical mass to enable WOM. It may take you a few years to get to critical mass, but once you’re there, all of your growth is going to be WOM.

If your product has a high frequency of use, then start with PMF, go to growth, and only then try to figure out the business model. If not, then start with PMF, then figure out the business model, then growth. The reason is rather simple: If you can show high growth, that will increase dramatically the valuation of your company, will allow you to raise a lot of capital, and then enable you to figure out the business model. However, if you don’t have a high frequency of use, it means that your user acquisition will be costly, and therefore you will need to show that you have a business model to support it. Frequency of use defines your start-up strategy and, of course, your GTM strategy.

Marketing’s job is to create a system for accelerating the PMF journey. There are two phases: Learning the needs in order to define the product and the market (who are the users and where are they) and fixing the price, which is a derivative of the users’ willingness to pay. Promotion, which is by and large intended to bring users/customers to use the product.

You don’t know how to bring your users, NO ONE else will know either.

With a high frequency of use, your strategy is simple—invest in user acquisition until your WOM works.

You have to start by answering a simple question: Who are your users and where are they?

The most important thing about online promotion is that you can measure results in real time and make necessary changes immediately.

Online marketing and the ability to measure results instantly is very addictive; it’s easy to forget to check other promotional models.

Social media is a special case of bringing users—reaching out to influencers who have a great number of followers.

Once you know who and where your users are, offline outreach might end up being more efficient than any other form of promotion.

Our experience shows that PR works in some places and, in others, it is very expensive and less efficient. One of the most important goals of PR is establishing credibility. When people hear about something new, some of them will look it up.

PR is, at its core, local. In some cases, it may even be hyperlocal. PR may also determine your GTM strategy.

Think you can do it on your own? Don’t. You will need a PR firm. They are the experts and you’re not.

CAC refers to direct spending on user acquisition, so the cost of the marketing department or the retainer of your PR agency is not included.

The bottom line is equal to the total marketing spent divided by the number of users acquired in a period, including organic growth. Once organic growth becomes exponential (i.e., you gain more users than you churn), you can start lowering the marketing spend.

If WOM is not working well enough, trying to accelerate it with a referral program may work.

“Going global” as a strategy is dependent on where you start. If your company is based in the US, you may become a market leader long before you even think about the global market. If you start in a small place (like Israel, Estonia, or Sweden), your backyard market is too small and therefore you have to think about going global very, very early in your journey.

If your home base is a small country, then you should be thinking global before you even start.

The following might change over the years, but the top five markets are nearly always the same. Google: the US and then Brazil, India, and the UK YouTube: US and then Russia, Brazil, and Japan Facebook: US and then Vietnam, Brazil, and UK WhatsApp: Brazil and then India, Mexico, and Indonesia Instagram: US, Brazil, Russia, and Italy Waze: US, France, and Brazil Moovit: Brazil, Turkey, Italy, and US Uber: US, Brazil, Mexico, and UK Got the picture? There are some countries here that probably didn’t even cross your mind as a target for expansion. But if you think about it, there are 210 million people in Brazil, 1.3 billion in India, 275 million in Indonesia, and 115 million in Mexico—these are not small countries!

In order to do business, small countries need to adapt to large places. Large places, by contrast, can be nearly self-sufficient in terms of business and therefore don’t need to adapt to the rest of the world; the rest of the world is more likely to adapt to them. The result is nearly always the same: Start-ups that were born in a small place figure out their globalization early… and for good reason. If you live in a country with a small market, as soon as you figure out PMF, or even before you’ve completed it, you need to go to a new and larger market. If you are in a large market, say the US, you start in your hometown, then you go to San Francisco, and then build one metro area at a time.

If you are coming from a small place and you aim to become a global market leader, then after two to three product iterations, even when it is not good enough yet (but it’s starting to look like it is going to get good enough), your learning and improvement will become much more significant in the large target market and not with more iterations in your small home market.

Your go-to-market strategy is also based on your funding: The poor start-up formula: Go to a significant country where it is easy to win. The rich start-up formula: Go to a country that will make the biggest impact and serve as a stellar reference. Regardless of where your start-up fits, don’t forget that you must make mistakes fast. That means go in parallel to several countries with the underlying assumption that there are no market specifics (like regulation or infrastructure) to trip you up.

These four markets (the US, China, Japan, and the UK) are the most challenging for a few reasons. They are large and influential and, as such, they are the most attractive markets for many companies. Their attractiveness results in a lot of competition with a high customer acquisition cost. All of the marketing tools are expensive. On top of that, some markets will require a very different cultural approach.

At the end of the day, the decision to sell a company is about 99 percent personal.

Personal does not necessarily mean rational.

It turns out that most people are ego-driven. If they opt to leave on their own accord, they tend to still believe in the company and, therefore, will exercise their options. If they were let go, however, what crosses the minds of most people goes something like this: I think I’m really good. If they let me go, they don’t know jack shit and therefore I don’t believe in the leadership, which means the company is not going to be successful. That guy missed an opportunity for about a quarter of a million dollars—what could have been a life-changing event for him at the time.

Every once in a while (say every half year), pick ten random employees and ask them, “How many options (or RSU—restricted stock units) do you have? How much is that as a percentage of your holdings? How much is it worth today?” In my opinion, they need to know.

I’m going to admit something shocking here: I like to pay taxes—it means there is profit, and profit is good. What I don’t like is overpaying on my taxes because of a lack of planning.

You are not in a good place to negotiate if you’re trying to please everyone. So, LET SOMEONE ELSE NEGOTIATE the deal. That could be your lawyer or a trusted board member (assuming you have one).

That’s the most important thing—when there are changes, people care about themselves first. You have to address that right away, as rumors will begin circulating fast.

Here are a few final tips when it comes to negotiating and staying. Let someone else negotiate on your behalf. You should signal nothing but the commitment to deliver. The main message should be, however, that there is nothing in the world that you will be able to deliver in four years and you won’t be able to deliver in three. Don’t worry about the journey to come in the new organization. If you don’t want to stay, you will find a way out. Create a different spread of retention; otherwise major attrition is what will happen after the end of the retention package!