This is the second in a series of articles on what it means to be a Five Star Startup. In my first article, I explained the five dimensions that most startups are evaluated on. The first dimension is Product. In this article I will describe the five star product (in my system of evaluation) and offer some of the underlining criteria by which you can score your product. Here we go:
You have a truly remarkable product – in the eyes of customers. There is nothing quite like it on the market. If there are other products like it, yours is better by a factor of 10. It’s not just 2x or 3x better, it’s not just cheaper or faster or easier to use, it’s exponentially better. It solves a big problem or pain point that consumers or companies are willing to pay for. And they want it NOW. It’s a “must-have” product, not a nice-to-have product.
Your product is not easy or cheap to replicate. It is imbued with awesomeness, has a cloak of invisibility (trade secrets) and/or natural barriers to entry (patents, trademarks, other IP). By the time the Chinese figure out how to knock it off, you will have already launched an enhanced version that keeps them and other competitors one step behind and clearly inferior.
You have achieved product-market fit. You have customer metrics and feedback that demonstrates strong early adoption and customer love. You have attracted brand ambassadors and product evangelists that regularly spread the love. For every customer that you sell, they recommend your product to three or four of their friends or colleagues. Your product enhances or enables other products and services to such a degree that their owners push your product — because it makes them better and helps them sell more.
You don’t just have a Minimum Viable Product (MVP), you have a MinimumScalable Product. You can produce it and sell it in mass quantities. You can recite your COGS in your sleep. Once you hit a certain scale, the gross profit margins are sweet — higher than industry average. You don’t compete on price, but once the big boys or upstarts take notice and bring pricing pressure, you have sufficient margins to withstand the onslaught.
You have a 3-5 year product plan. Every hour spent brainstorming, researching, and planning….every line of code written and every dollar spent on product design and development…brings you one step closer to achieving that plan. You are not pursuing the product strategy of the week. You are not building one-off features that don’t scale just because they are cool, or because a few vocal customers ask for them. You are learning from the market and adjusting the plan regularly, but it remains perfectly aligned with your vision to own the market and stay two years ahead of the competition. You are on the path of becoming a defacto monopoly.
Score the following criteria on a scale of 1 to 10, with 10 being the highest. Try not to use the numbers 4, 5, and 6 — they are fudge numbers. Your product either clearly excels in each of these areas, or it is subpar:
____ No other product exactly like ours, or ours is disruptive, 10X better
____ Our product solves a big problem or pain point for a large market
____ Our product is wanted/needed by customers now, not a future maybe or nice-to-have
____ Our product has significant competitive advantages and barriers to entry, not easy to replicate
____ Our product has customer traction and metrics that support wider adoption (with more money or talent)
____ Our product has attracted fervent evangelists who regularly refer it to their friends
____ Our product makes other products and services better, they push us to increase their sales
____ Our product is scalable and has high margins, we have a good handle on our COGS
____ We have a clear, comprehensive, 3-5 year product plan for market domination
____ It would take a competitor at least 2 years to match our product capability or market penetration – it would be more cost effective for them to buy us rather than compete with us
Total your score, divide by 10. If your score is between 7 and 10, congrats, you have a Five Star Startup Product!
Don’t disparage if your product score is below 7. The product can always be made better. If you excel in the other four dimensions, you are still capable of attracting investors and building a successful company.
My next article discusses The Five Star Startup Market.