Initially, the Silicon Valley world was all enamored with the Minimum-Viable-Product (MVP). The thinking was that you need to check whether your product idea can sell to build a unicorn.
Now there is an advance on this concept with the Minimum-Viable-Company (MVC). The thinking is that it is not enough to come up with a product. You need to show that your business is viable. The assumption seems to be that venture capitalists like to know that there is a venture behind your idea that resonates with a market, i.e. focusing on the product-market combination. At this point, one assumes, the VCs will come charging in with their money and help build the venture. And since VCs like to have “professional” management, they are likely to replace you, the founder, with a more experienced manager from another unicorn or corporation.
But there are some issues with the MVC:
- It assumes that getting VC is key and therefore MVC is key
- But VCs fund very few ventures, about 100/100,000 ventures started
- VCs succeed on very few, about 20/100,000, of which one is a home run and 19 are successes. This suggests that 99.98% of entrepreneurs do not benefit from VC
- Most home runs have been in Silicon Valley, which is why the top 20 VCs are there
- Unicorn-entrepreneurs getting VC early lose control of their venture and keep 100% less of the wealth created.
Most importantly, the actual track record of unicorn-entrepreneurs shows that about 99% took off without venture capital, and 76% never got it. Outside Silicon Valley, about 90% avoided VC. And unicorn-entrepreneurs who avoided VC kept about 7 times the wealth created as those who got VC early.
So why does this happen?
- With the MVP or MVC concepts, the focus is on the product and the venture.
- If you watch misleading shows like Shark Tank, the focus is on the product
- Or if you are a fan of pitch contests, you think that 2-minute pitches are key
- Or if you go to business schools, the focus is on the product and the strategy.
The problem is that they are all misleading or misguided.
The fact that many, if not most, unicorn-entrepreneurs succeeded by imitating and improving someone else’s product, or by growing with a product that could be easily imitated, shows that it is not just the product or the product-market combination. It is the product-market combination executed better than the competition.
A focus on the product or product-market combination means that you need strong intellectual property in the product and for the market selected. And then be able to defend it. Most unicorn-entrepreneurs could be easily imitated.
Unicorn-entrepreneurs mainly succeeded, not because of MVP or MVC, but MPE, i.e. Maximum-Potential-Entrepreneur. They were better leaders than their competitors. This means you, your skills, and your ability to find the right strategy to dominate the market.
Your skills should include:
- Product development skills, or else you could be Zuckerberged. Mark Zuckerberg was asked to develop some software. He seems to have appropriated the idea.
- Sales skills when no one knows your name. Learn from Steve Jobs.
- Finance skills, to find the right financing for growth while maintaining control when no one, including friends and family, will return your phone call.
- Financial skills to do more with less when all you have is less and all you want is more.
- Launch skills to take off before the end of the runway, i.e. before you run out of cash. Look at Elon Musk. What he has pulled off at Tesla is astounding and is making the short sellers sweat in their pants.
- Leadership skills after take-off to build a giant and dominate your industry. Look at Jeff Bezos, Steve Jobs, and Mike Bloomberg.
MY TAKE: It is good that there is more recognition of the importance of the business and not just the product. If your product does not connect with a market, you have no business. But if you want to build a giant and control the wealth you create, focus on becoming a Maximum-Potential Entrepreneur. All the others are short cuts. They may make others rich, or no one rich.