Thinking About Thinking

Start With The Problem

Posted in Founder-Owned Businesses, Growth Equity, Philosophy by larrycheng on October 23, 2012

After hearing dozens of company pitches over the last week or so, I noticed a common theme with how CEOs told the story of their business.  They typically expended great energy explaining what their company’s product or service does.  They will talk about features and functionality that no other player in the market has.  Where appropriate, they will dive into a demo to show exactly how their product is such a game changer.  While this is important, in some respects, I think it is putting the cart before the horse.

Personally speaking, I think a good story for a business starts with the problem that is being solved.  It’s hard to fall in love with a product, if you don’t believe it solves a big problem.  A problem worth solving is one that is a high priority issue for the one experiencing it.  It is a problem that is experienced to a similarly high degree, by a large and common constituency.  It is also a problem that people are willing to pay, and sometimes pay substantially, to resolve.

In every company pitch, the CEO will try to tell me what the company does.  But, you may be surprised that in many pitches, the CEO may neglect to really spend time articulating the problem their company solves.  Sometimes when I ask very directly what problem it is that they solve, the response will be a description of product functionality, not in fact a problem.  This to me is a telltale sign that the company was started to create functionality, not necessarily to solve an important problem.

If we were ever to get into due diligence on a company, we will likely spend as much time validating the magnitude and priority of the problem the company solves as we do on the merits of the product.  If we love your product, but are unconvinced on the problem it solves – we are unlikely to get across the finish line on an investment.  The reality is a company can control how a product evolves and develops.  But, the problem is what it is – so choosing the right problem to solve is critical for the ultimate success of any business.

So my simple advice is that when you tell the story of your business, start with the problem.  If you convince people of the problem your company is trying to solve, you have laid the foundation for them to love what your company does.

2 Responses

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  1. What’s Your Problem? — Muzeview said, on October 26, 2012 at 12:00 pm

    [...] Cheng makes a great point about start-up businesses articulating the problem they are trying to solve.  But his point is in [...]

  2. Pedro Sttau said, on April 18, 2013 at 6:12 pm

    Good point. My question is, does it always have to be a big significant problem? Twitter did not attempt to resolve a significant problem. In fact, I bet that it accidentally resolved multiple problems without really intending too, and I assume this was the case for many companies.


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