Startup Lessons I’ve Learned This Week

“Build a visual library” is one of the most valuable design tips I’ve ever head. Great designers don’t try to think up cool ideas out of nowhere, they spend a lot of time browsing works of others, and creating a library of patterns in their head. By using and recombining those patterns/tropes they create new ideas.

I should do the same thing with startups and SaaS tools. Put more effort into browsing and analyzing successful projects to build a library of ideas I can make my own stuff out of.

Toy Markets

Bet on “toy markets” — niches that look tiny now, but will be big in the future.

Because of hindsight bias, it’s hard to look back at Amazon’s decision to sell books online, and understand how small and uncertain the opportunity may have seemed back then. And it’s difficult to look at markets that seem tiny now, and realize how fast they will grow.

It’s tempting to do what everyone else does, but really huge opportunities look like risky bets on toy markets.

Toy markets become huge in two ways:

• Adjacencies — take over a small but valuable set of customers, use this niche as a base to capture a larger but similar (adjacent) audience. Like Uber expanded from “order a black car” to “order any mode of transportation”.
• Behavior Change — start with no market at all, create a company that changes the way humans live their lives. Create demand and own the market you’ve created. Like Apple did with smartphone and Google did with search.

Taking over a toy market doesn’t take a huge amount of money relative to progress (no need to compete with large incumbents), lowers expectations and sets easier targets to hit, results in less dilution and more ownership for the founders.

Noone has a formula for reliably identifying promising toy markets, they never look the same twice, and are never obvious from the start. So you need vision, independent thinking, and your own framework for success.

Small, rapidly growing niche

Focus on taking over a small market that will be big in 10 years. Build a product that a small number of people in a rapidly growing niche will really love.

It’s much easier to expand from something that a small number of people love to something that a lot of people love, than to grow something that a large number of people kinda like.

One way to know that you have product market fit is that you’ll get growth by word of mouth.

Low-hanging fruit areas

You can expect society to perform suboptimally and find low-hanging unsolved problems in areas where:

• Decision-makes have little to lose or gain personally from making improvements.
• Decision-makers can’t reliably learn the information they need to make decisions, even though someone else has that information.
• Systems that are broken in multiple places so that no one actor can make them better, even though some magically coordinated action could move to a new stable state.

Get used to being confused

It’s okay to feel confused when you’re learning. Instead of being frustrated about that, recognize that this is how learning is *supposed* to feel like.

You look at a new thing, you’re feeling confused because it’s new, then you get used to it and understand it better, and you aren’t confused anymore.

Improving/Inventing

Success comes from persistently improving and inventing, not from persistently doing whats not working.

When your project is not a hit, don’t keep pushing it as is, get back to improving, present each new idea and improvement to the world, until people are shouting “shut up and take my money!”

Don’t waste years fighting uphill battles against closed doors. Improve/invent until you get that huge response.

Charge More

Don’t be afraid to charge more:

- Most founders severely underprice their products/services. If your product is valuable — people will be willing to pay for it.

- Higher margins will allow you to invest into improving your product. It’s better to compete on quality than on price.

- It’s easier to sell 10 $100 products than 100 $10 products.

- Higher prices filter for better customers.

- If doubling your price won’t lose you more than half of your customers — that’s free money.

Startup Lessons I’ve Learned This Week was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.