Sequoia’s Mike Vernal has worn many hats. He was VP of product and engineering at Facebook for eight years before getting into investment. His portfolio includes Houseparty, Threads, Canvas, Citizen, PicsArt and more, and he continues to invest in companies across a broad spectrum of stages and verticals, including consumer, enterprise, marketplaces, fintech and more.
Vernal joined us at TechCrunch Early Stage: Marketing and Fundraising earlier this month to discuss how founders should think about product-market fit, with a specific focus on tempo. He covered how to organize around the pace of iteration, how to design with customer feedback loops in mind and how Sequoia evaluates companies with regard to tempo.
What is tempo?
Vernal breaks down tempo into two separate ingredients: speed and consistency.
It’s not just about going fast (which can often lead to some recklessness). It’s about setting a pace and staying consistent with that pace.
One of the very best compliments an angel can bestow on a founding team and include in an introduction to us is, “They’re just really fast,” or “She’s a machine.” What does that mean? It doesn’t mean fast in the kind of uncontrolled, reckless, crashing sense. It means fast in a sort of consistent, maniacal, get-a-little-bit-better-each-day kind of way. And it’s actually one of the top things that we look for, at least when evaluating a team: how consistently fast they move. (Timestamp: 2:26)
Vernal went on to say that tempo is directly correlated to goals and objectives and key results (OKRs). Building a feedback loop into those OKRs and determining the tempo with which to attack them is critical, especially during the process of finding product-market fit.
Finding product-market fit is not a deterministic process. Most of the time, it requires iteration. It requires constant adaptation. My mental model is that it’s actually just a turn-based game with an unknown number of steps, and sometimes either the clock or the money or both run out before you get to finish the game. It’s kind of like a game of chess. So what is your optimal strategy? (Timestamp: 4:25)
Feedback is your friend
As Vernal explained, finding product-market fit is all about feedback, and that must be an ongoing, built-in part of the process. He outlined how founders can go about designing with that in mind.
A common pattern I see is that people spend a bunch of time at the very beginning of a company talking to a bunch of other people. They talk to advisers, they talk to investors, and they talk to potential customers to hone their thesis. And this is great. You should definitely do this. But then they start building. And often, they will go off into a corner and end up building for nine to 12 months, sometimes even longer, before they go back and actually start testing the hypotheses. And it’s easy to imagine why. It takes a while to build a quality product. It takes time to build something valuable enough to sell. And people generally aren’t going to adopt a super incomplete alpha. But it’s also a super tough setup because you don’t get any feedback during that time, and the market continues to evolve in the interim. Your competitors continue to evolve. And if your company’s story is a turn-based game, spending a year on turn one is a bad strategy. (Timestamp: 4:50)
There are clear ways to avoid this trap, according to Vernal. It’s a two-fold strategy.
First, you need an explicit consistent tempo for the company: a cadence where you’re going to come up for air, evaluate what you’ve built, and course correct. Second, you need to design an explicit feedback loop at every single stage. It’s not enough to just have internal milestones where you track whether you’re 50% done with some feature. You need to build things in such a way that you can actually show them to customers, show those features to customers and get real feedback. (Timestamp: 6:36)
This may be different for each founder and company based on what they’re building, but the cadence of shipping and getting feedback — whether it’s built specifically into the product or showing the feature to customers or having frequent, regular conversations with those customers — is absolutely critical.
Wedges and hedges
This process of getting feedback does not come naturally. It must be designed. Vernal shared some tips on how to go about this.
The idea is you want to find some small acute pain for a customer and build a simple, great solution for that pain and then expand from there. That’s a great strategy. Find the narrowest point, or wedge, that you can use to get started. Second, explicitly break bigger problems into smaller ones. And for each smaller problem, design a feedback loop. Ideally, you can ship interim work to customers after every single stage and get their feedback. Even if it’s a little bit awkward. The feedback loop will not come naturally. You have to design it, and you have to be explicit about it. If you can’t do that, say you can’t ship the interim product to customers for some reason, then at the very least, show it to them and get their feedback. Be explicit and be greedy at every single step along the way about getting feedback. (Timestamp: 7:45)
He added that building in a corner without any feedback for months at a time is highly correlated with failure. He also outlined the various ways that consumer companies and enterprise companies alike can go about building these feedback loops in a way that makes sense.
You can check out his specific tips for designing feedback loops in the video below.
When we’re evaluating a company, there are usually three dominant dimensions that we look at: team, product and market. At the seed stage, you typically only have two of these: team and market. Often you’re pre-product, and almost certainly you’re pre-product-market fit. Fundamentally, that means we’re evaluating three things. Is the team good? Is the market good? And can this team find product-market fit? So how do we evaluate that third question? I think it really comes down to this view of the world. First, do we like your starting point? Do we feel like you have the right entry strategy, the right wedge? Second, do we like your strategy? Do we think you have the right sequence of steps? Do we think you have the right path forward to find product-market fit? Do we believe you can find product-market fit? And third, do we think you can you have the speed, the cadence, the tempo and the consistency to actually find product-market fit? (Timestamp: 12:18)
You can check out the transcript from the session here.
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