“Do you know the pain that customers are going through?” says Olena Petrosyuk. “If not, find someone who does.”
Petrosyuk is a partner at Waveup, a London and Kyiv-based venture capital consultancy established to advise startup founders on a range of issues, including market entry, valuation and mergers and acquisitions. I’ve booked a call to discuss the thorny topic of product market fit and the validation of business concepts. As it turns out, Petrosyuk has strong views on the importance of having an appropriately skilled and knowledgeable founder in place. Or perhaps more accurately, a founder who fully understands the market they are seeking to address.
But does that mean in practice?
If we focus for a moment on the innovation economy, the stereotype of the inappropriately skilled founder is probably someone with a huge amount of technical or scientific knowledge who nonetheless struggles to turn ground-breaking intellectual property into something that is commercially viable. Indeed, for a long time, the story of the tech ecosystem here in the UK was one of great ideas coming out of universities and science parks but failing to gain traction in the marketplace. The infamous “valley of death” in which funding dried up loomed larger in the imagination of entrepreneurs and policymakers. Founders who were overly focused on their technology were seen as part of the problem.
But times have moved on. The tech ecosystem in Britain, and across Europe as a whole, is awash with mentors and successful entrepreneurs who are prepared to spend time passing on their hard-earned wisdom to others. Slowly but surely entrepreneurs on this side of the Atlantic have got better at commercializing IP, even if there is some way to go.
So what does founder/market fit mean in 2023?
Petrosyuk – who is also Chief Operating Officer at AI-driven customer/product matching company, Kevu – puts it simply. It’s all about having a genuine and profound understanding of the customer.
“You don’t have to understand the market,” she says. “You do have to understand the customer.”
There is perhaps a temptation to think that knowledge of a market or industry sector neatly aligns with customer insight. After all, if you’ve worked in, say, banking for twenty years, logically you might be the ideal person to set up a fintech company. All that extensive market knowledge can be funneled into a new product that will take the market by storm.
But as Petrosyuk points out, people who have worked in a sector such as banking for a long time, may not be particularly aware of the issues that frustrate or annoy their consumers.
“You might have someone who has worked in banking but has never had to take out a loan. So they don’t understand the problems,” she says.
Personal Struggles
By that analysis, the most appropriate founder for a Fintech might be someone who has personally struggled to navigate the practices of the financial services industry and, thus, sees ways to make improvements – innovations that long-standing veterans of the industry have perhaps failed to see.
To take another example, the best person to run a platform aimed at disseminating and commercializing the work of YouTube or TikTok influencers and creators might not be a media insider but someone who has been a creator and knows the problems.
Becoming That Founder
But it’s perhaps unrealistic to suggest that every founder should have personal experience of the pains and frustrations of target customers. But as Petrosyuk points out, you can become a customer expert. “You need to do the groundwork,” she says. “Dive into the market. Talk to users. Identify their pain.”
Equally important, find out how much a potential customer might be prepared to pay to solve a particular problem.
That particular element of customer understanding can mean the difference between success and failure when the business actually goes to market. For instance, customers may have a problem but that doesn’t mean they will be prepared to have it solved.
There is a tricky equation here between addressing customer pain and hitting an appropriate price point and payment model for a product that will take that suffering away. This is something that has to be addressed at the go-to-market stage but finding the commercial sweet spot is likely to be much easier if the founder – and members of the team – are fully aware of the price sensitivity of target consumers.
And of course, this moves the discussion on important issues about whether a new product can be sold at a workable price. This involves complex calculations about how much the customer will pay, the cost of marketing, the timeframe for a return on investment, customer churn, and market competition.
As Petrosyuk sees it, answering those questions will be much easier if the right founder is at the helm.
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