Below is the “Tip of the Week” transcript from the Podcast Episode 11: The #1 Reason Startups Fail
This week’s tip is about the Curse of Knowledge which, simply, is a cognitive bias that causes more-informed individuals to find it difficult to think about problems from the perspective of others who may be less-informed. Gabriel talked about how founders are often very biased to one particular channel that they have had success in. This can be particularly problematic when an experienced founder may have entrenched ideas about who the customer is, what they value, where they prefer to buy and how a product should be positioned in order to compel that purchase. And while it’s good to have a hypothesis, in the world of startups, this hypothesis often is dynamic and constantly changing. And many of the best founders are those that are customer obsessed, always trying to understand their unmet needs and behaviors.
You’ve probably heard many companies talk about pivoting… “We thought we could sell x to y and what we really found was that this whole other customer group, not previously considered, was in significant need of a slightly different version of x.” There are unlimited ways in which a startup may pivot it’s product, target market, monetization strategy, or otherwise… and founders must listen to their customers in order to adapt. So, when evaluating startups with a hypothesis alone, investors must guess whether the founder’s pre-conceived biases will limit market traction. Where, if a startup has prioritized traction from the beginning, they can clearly articulate who the customer is, where they buy and why they’re compelled to purchase. If you were getting your investment dollars in, which scenario would you prefer?