Keep Calm and Don’t Generalize

Imagine if this elevator pitch was given to you  

“There is a lack of reliable sources for procurement of farm fresh produce & it’s impossible to buy directly from farmers without traveling to farms. High consumer demand of farm fresh produce is hugely under-served.” 

For those of us that have been brought up on a steady stream of Bollywood movies that show farmers as poor, uneducated simpletons, this statement could ring true. However, when I made the effort to dig beneath the surface, the generalizations made in this statement are very misleading.  For example, a simple online google search to buy farm produce in Mumbai provided 4-5 websites that supply farm fresh vegetables. I went ahead and placed orders on a couple of them to test the quality of produce… so that debunks the “impossible to buy” assumption!  

So now…..what do you think are the chances of me calling this founder back? 

When a founder generalises an issue that a few people face and claims that it plagues the entire population that they are addressing, they treading on dangerous waters. Here’s how:  

  1. The target market is actually much smaller than they are estimating  
  2. Sales targets promised to the investor (and the team) are unrealistic  
  3. The product/service requires several customizations to address the customers that fall outside their calculated target market  
  4. Sales growth stagnates as the target market shrinks 
  5. Budgeted spends are overshot thereby reducing the runway to pivot  
  6. The customers, team, investors and eventually the founders lose confidence  

This is a common plot of many companies that I have witnessed shutting their doors (as an investor, employee or even an observer)  

I understand that as a founder with a limited budget, it is difficult to conduct a survey that includes every person in the actual target market, but it is unwarranted to survey a small sample of people in this market and assume that it exemplifies the overall population. Founders bear the brunt of this error when they try to scale their businesses beyond the reach of the market that they have surveyed (geographically or demographically).  

My advice to all the founders out there is to: 

  1. Test your business model in a small geographic area, preferably a home city or an area that can represent what you would call your “target market”  
  2. Build an MVP  
  3. Test the MVP with all the different people (that come under your TAM) in that one area  
  4. Identify the customization that your product requires to serve each member of the audience 
  5. Decide which audience makes most sense to pursue as the primary target (usually the one that is willing to pay the most to solve this problem) 
  6. As you solve the problems of this primary audience start testing out customizations that will solve them for the remaining part of the TAM   
  7. Once you have achieved a level of comfort in understanding your target audience you can take your model beyond the initial area that you started off in 
  8. Finalize your business & revenue model based on the actual knowledge you have received from your testing your product 
  9. Build and roll out a plan for a new geographical area – keeping in mind that you will need to make customizations for regional preferences  

When founders use funky excel formulas to magnify a problem, the people that it affects, the funding needed to address that problem, the sales numbers and so on… all in the hope of getting a higher valuation and a larger round of financing… they become the problem instead of solving one.  

9/2018