4 Difficult Steps on the Journey from 'Zero to One' Sometimes, you have to kill your favorite idea.
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There is a common misconception that the hardest part of entrepreneurship is turning your product into a metaphorical rocket ship that will scale into the stratosphere. That stage in the journey is known as going from "one to 10." You've proven your product-market fit, and now it's time to double down on what is working, while continuously iterating on your strategies in order to scale.
But, before the fun begins, founders must first go from "zero to one," a phrase popularized by PayPal co-founder and venture capitalist, Peter Thiel, in his book Zero to One. This is the first, and most challenging, stage in building a company. Before you've made your first sale, or hired your first employee, this is the time when you have to secure product-market fit, or simply put, prove that your idea is actually good.
The idea of going from zero to one sounds simple in concept. But, it is a huge challenge that requires you to show your idea is strong enough to build a company around, and it's very possible that none of your ideas will ever reach proof of concept.
During the zero to one stage, access to guidance and coaching is limited. Unlike going from one to 10, the path to success has not yet revealed itself. You may receive some advice and tips here and there, but it's ultimately up to you to navigate your way to product-market fit.
The four difficult steps we took to get from zero to one.
We founded and launched Arcus in 2013 (then known as Regalii) at Y Combinator, but in 2016 we made the decision to shut down our first product and pivot our entire business model. It was heartbreaking. We had dedicated three years to building and proving this product. However, we had come to the hard realization that our product simply didn't have the product-market fit needed to grow the company. This was a very tough pill to swallow. However, it turned out to be the right decision. Our pivot in 2016 generated record growth numbers for us in 2017, which continues today. Here are the four steps we took that successfully led us from zero to one:
1. Find the balance between using research and gut feeling for decision making.
Effective decision making is key to quickly growing an early stage startup. But you can't rely on just the data or just your intuition. There needs to be a balance. Intuition has taken you this far, but don't let the combination of intuition and ego shoot you in the foot. For example, if you're in a B2C market and the data tells you that you're not doubling users or sales every month, then there's something off with your model. The problem is not marketing or user comprehension, it's simply that your product hasn't found product-market fit yet. In our case, we had growth with our initial B2C cross-border bill pay product, it was not the hyper-growth we needed. The research showed us the problem, and our intuition found the solution -- B2B banking APIs that are a win-win for banks and consumers.
2. Find out why it's not working.
It's not enough to recognize what's not working. The depth of the problem must be realized. After a few years of developing our B2C product and bringing on users, we still weren't seeing the growth we needed. Something wasn't working, but we couldn't figure out why. With all the time and money we had put into our product, we knew it was time for a hard and honest look in the mirror to find the root cause. Through this, we found the two sources of our slowed growth which couldn't coexist. The first was that our B2C product required a change in consumer behavior. People had to stop sending money and start directly paying off things on behalf of their family. The second was that our product required a two-sided market which is inherently complex, especially for a startup at the seed stage like we were.
3. Kill off ideas you love.
In 2016, we made the hard decision to sunset our original product of B2C cross-border bill pay and gift cards. It was our first idea, and an idea we loved, but who knows where Arcus would be today if we hadn't found out why our product wasn't working and made the tough decision to kill it off in order to keep growing. Sometimes by pivoting from your product's first iteration to its second, you can stumble upon the best solution to the problem you originally set out to solve.
4. Embrace and address the tough day-to-day questions to stay aligned.
During the early stages of a company, you're trying to hyper-focus on what matters. But it feels like everything matters, so you go back and forth between focusing and trying to turn every opportunity into something valuable. However, when things go south, it can feel natural to place blame elsewhere. That's a problem in its own regard, but what it also conveys is that the tough day-to-day questions aren't being asked or addressed. By embracing hard questions that you might not want to ask or hear the answer to, you're able to get in front of your problems. This is a period where you want to grow every day, so by not addressing hard questions, you're only slowing yourself down.
Founding a startup is one of the most challenging ways to try a new idea and figure out what works. There are countless stories of entrepreneurs whose first few companies, ideas or pivots didn't work out and pushed them to the brink of failure. Without emotional endurance and resilience, it's very easy to get lost, discouraged and overwhelmed by the day-to-day challenges of building a new company around a new and unproven idea. The ones who succeed have an innate awareness of how to use these traits to approach challenges with a level head and ideate effective solutions that will take the company from zero to one, and eventually from one to 10.