The money gap: a crucial hurdle of desirability
A crash course on desirability, including a tool to track it
In this issue
A scale to track early-stage desirability
The money gap, the biggest early-stage hurdle
Another week, another video
Also this week’s edition is available as a video.
Is my idea any good?
We are now in the last part of the series where we unpack this model. This diagram is helping us to understand whether we have a good idea.
Last week we touched upon viability, showing that viability is vague and profitability is a good starting point for a lot of ideas. If you missed that, you can go back and watch that video or read it in the post on substack. Desirability is the last to unpack.
It's the main reason startups fail
The key question of desirability: Do people want it? Of all 3, this one is the most easily understood by people but often the most poorly recognized and tracked. How do we know? Look at this study that analyzed the failure of 101 startups:
People didn't want it. If you want to sell something, you better have something that people want. It sounds so easy, how can it go wrong? Well, it's hard to 'measure'. In the previous edition of this research, ‘No Market Need’ even was #1. I think lack of cash is fed by having a product the market doesn’t desire. No desirable product = no revenue. There is an interplay between the two.
The Desirability Scale
How to make sure you are on the right track of having something people want, or in other words, how to track desirability? For starters, it doesn't help seeing it as a boolean with 'yes it is desirable' vs 'no it is not desirable' as answers. That is not helpful.
You should see it as a scale. A scale where you ask yourself how much evidence have I seen that people are likely to want this solution? The above scale is optimized for B2C, but also contains some B2B elements.
What does your customer do - what to measure/look out for
The scale explained, they = customer:
They talk about a problem - problem talks
They care about the problem - follow-up talks
They care about solving it - commitments for personal details
They know someone who cares about solving it - referral to others
They crave your solution - e-mail signups / waitlist
They pay for your solution - pre-orders / actual sales
They love your solution - good reviews
They come back for more - recurring sales
For quick explanations for each of them, check out this video.
The money gap
So I've just created 9 different signals. But what often can be useful, is to look for the commonality in the elements. While making this, I actually saw three types of commitment people give. This idea is not new, you can read more about it in the Mom-test, my unconscious must have worked here. It is what people 'spend', or currencies. There are three types: time, personal and monetary.
We see a block of time commitment. The red signals are all about people willing to spend time with you. They are spending their time on you. That’s a good signal. Be wary of clingy people, they want to keep on talking to you forever.
Then, we see a block of personal commitment. Are they willing to share something personal such as their phone number or email? Do they trust you with information? In the Mom-test, Rob Fitzpatrick also talked about reputation risk. If someone is willing to link you to someone else, "You should talk to this person", that also is a good signal.
Then the green ones. This is the monetary commitment block. These are only possible if you spend money. You can argue that the review signal is a time investment, but you need a monetary commitment to be able to give a review.
The money gap
So with these three blocks in place you can see a big gap. I call that the Money Gap. What I see a lot with very early-stage start-ups is that they are doing all the validation they can but never make a sale. One of the big hurdles is to get to your first paying customers.
You should figure out why the customer is or is not progressing. "Could you tell me, what is the reason are you not willing to pay €100 for my solution?" or "Can you help me, what is the reason I can't call you again?" - The latter falls in the category "things you don't want to say to your ex".
You don't need to cross off all the items. You can jump ahead. So if you can land beta sign-ups immediately, that could work. But you can miss out on crucial information of why they are signing up, that is something you could have found in the problem talks. So, each thing has its place. Read more about the power of talking here.
Done with the basic
My reflection on this mini-series:
This week’s video took quite some effort, partly due to the effects. But also because the novelty of such a series wore off. The content is quite basic. I don’t dislike it, but I started this 3-part series with more joy than I ended it with. It felt more like creating lectures, one reason I started this newsletter is to share stuff I’m extremely eager to share but can’t easily share during class.
One reason I quit stand-up comedy is that it became a chore rather than something I enjoyed. I was experiencing similar feelings when it comes to this edition. This is not a bad thing, this entire newsletter fuzzy front-end is a design process of me figuring out what I can produce. Key for me is that I enjoy what I produce. So I need to change course.
Therefore, in the coming weeks, I will focus on less basic stuff. More titulating stories, more abstract scientific insights to stretch up our brains. Are you ready for it?
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Any vote helps me, makes me smile like that first day at the disco.