As a management consultant, I’m often contacted by entrepreneurs seeking my help to develop great go-to-market and growth strategies before they have even confirmed if their idea is something customers would be willing to pay for. This risky approach is something that many startups were able to get away with during the age of blitzscaling and growth at all costs, a time when venture capital (VC) firms were flush with cash and willing to take chances on companies that hadn’t even validated their core offering’s product-market fit. However, those days are over.
Despite the burst of interest in AI-themed startups, VC funding in 2023 was at its lowest level since 2018. Investors are growing more selective, and many founders are having to do more with less. That means scrappy entrepreneurs are turning to bootstrapping to get their businesses off the ground, or they are recognizing that their business ideas simply aren’t ideal candidates for VC funding, making bootstrapping the best choice.
A bar chart shows global venture deal dollar volume rising from about $150 billion in 2014 and peaking at more than $600 billion in 2021; 2023 was just under $300 billion, similar to 2019. The chart is broken into angel/seed, early stage, late stage, and technology growth.
After a substantial peak in 2021, global venture deal dollar volume has dropped back down to 2019 levels, indicating a considerable slowdown in venture funding across all stages.
By going it alone, founders have to be disciplined from the very beginning because it’s their own money on the line. A solo approach forces entrepreneurs to manage costs religiously and focus on sustainable organic growth, sometimes forgoing inorganic expansion opportunities that VC-funded startups would not think twice about seizing.
But if bootstrapping requires more financial discipline, it also offers founders more freedom. Without investors to appease, these founders can first make sure that their product or service actually solves a problem that a large enough number of customers are willing to pay to solve. No one can afford to become the next Juicero, which failed in large part because customers realized they didn’t need a $400 Wi-Fi-connected device to squeeze juice packets that could just as easily be squeezed by hand.
Instead of growth at all costs, the lesson new entrepreneurs should embrace is good old-fashioned validated learning to refine their core offering and achieve product-market fit.
You don’t need an elaborate go-to-market plan to do that. You don’t need VC funding. You just need to start. In this article, I show you how.
Develop Your Core Offering
Every new business starts with a leap of faith—an educated guess, essentially—that the product or service fills a need in the marketplace. But the next step should be to put some data behind that faith, and make sure your core offering has traction and the right unit economics before you do anything else.
I once worked with an entrepreneur who wanted to help the development teams of large marketing agencies build visually consistent and coherent multipage websites. He had often been hired to create these as a freelancer, and he knew from direct experience that this was a problem that needed solving in this niche.
When I first met him, his priority was building out a five-year plan—but he hadn’t really figured out exactly what he was selling yet, or to whom. He was still trying to decide between a project-based business model, a subscription-based service for access to a specialized WordPress plugin for agency use, or a combination of the two. Nor had he worked out who his customer might be within the agency, much less how to craft his offer to appeal to them.
Clearly, my client (or any entrepreneur at this stage) wasn’t ready for any kind of long-term plan. Instead, I used Alex Hormozi’s $100 Million Offer framework to help him work out exactly what his core offering would be. There are many ways to determine a core offering; Hormozi’s approach is to maximize the perceived value of your core offering in the eyes of your clients by identifying their dream outcome and guaranteeing the likelihood of achieving it while minimizing the time and effort it requires. I like this approach because of its simplicity: People are willing to pay a great deal for a solution that solves their exact problem efficiently and effectively, and this framework puts those needs front and center, making it easy for you to differentiate your product or service.
Value presented as an algebraic equation reading: dream outcome times perceived likelihood of achievement divided by time delay times effort and sacrifice = value.
The most appealing core offerings provide guaranteed solutions with a minimum of time and effort.
Using this framework, I collaborated with my client to list:
The problems he wanted to solve.
All the obstacles the customer might face along the way.
How those obstacles could become solutions.
How he could provide those solutions.
We then eliminated any offerings that would be too difficult or expensive to fulfill or too difficult to sell.
Test, Learn, Refine
I usually recommend that entrepreneurs start by building out a minimum viable product (MVP)—a concept that should be familiar to anyone who’s spent time in tech circles. This is a cheap, low-effort (but still appealing and functional) version of your product that’s designed to test the effectiveness of your idea. Even if you already have a good notion of what you think your final product might look like, this isn’t the time to build it out entirely because you might discover that your customers actually want something a little—or a lot—different.
Instead, zero in on the central solution your product or service would provide and build out an offering as quickly and as inexpensively as you can. If taken to the extreme, AppSumo founder Noah Kagan says, you shouldn’t spend money to validate an idea, and you don’t need to know how to code. Instead, you should seek out a no-code or low-code solution. For example, if your product is a short-term apartment exchange service, you don’t need to build out an app and test it right out of the gate. Perhaps you create a Facebook group or Skool community instead, or even just a shared spreadsheet that you promote over social media. Then you manually match potential users and put them in touch with each other.
Dropbox famously validated its core idea with a simple three-minute demonstration video posted on Y Combinator’s Hacker News, where it received immediate, substantive feedback, and then announced the beta on Digg about a year later. The result was a 15-fold increase in the waiting list almost immediately.
This presentation slide by Dropbox founder Drew Houston shares the importance of product-market fit, MVPs, validated learning, and audience communication.
Dropbox validated its idea using a very low-tech solution—a three-minute video showing how the product was supposed to work.
By validating your idea as simply as you can and listening to customer feedback, you will be able to clarify exactly what problem you want your product or service to solve, as well as reveal potential pain points or areas of unmet need. It might even reveal that your idea is just not very good—but if that happens, you’ll ideally have enough data to know how to make the next version better. Only once you have reached the limit of what you’re able to do manually or with minimal automation will it be time to build out a more complete version of your offering.
Know Your Customers
Market research is one way to define your audience, but you will never truly know who your customers are until you actually start selling to them. Australian entrepreneur Gretta van Riel suggests experimenting on a small scale, using about 30 social media influencers who represent your main potential customer personas, and seeing where you find the most conversion success. You might be surprised to discover that the new e-commerce product that you launched for Gen Z teenagers is actually more popular with their Gen X moms.
Often the distinction is more subtle. I once consulted for a new online proprietary trading platform that was already making seven figures a month but had no idea why it was so successful, and thus no idea of how to build on that success. I helped the platform founders run a test-and-learn conversion campaign to find out what customer persona spent the most and offered the greatest customer lifetime value to the company.
In this particular case, we wanted to confirm certain assumptions about the company’s customers, such as age, gender, and their trading behavior. We tested this last characteristic by a specific offer in one of our marketing campaigns and used the CEO’s social media presence to survey thousands of people online. One of our findings was that the biggest challenges were the most popular, allowing the company to target those higher-volume traders more effectively. Not only was the company able to improve its marketing funnel by figuring out which customer to target, it tripled its revenue from ad spend and decreased its customer acquisition cost by 70%.
Keep Iterating
I’ve met so many new entrepreneurs suffering from paralysis by analysis, getting bogged down with research and planning, when the reality is that many of them could start their business in a weekend. All you need to do is come up with the germ of your idea and find the simplest way to validate it. It might be as uncomplicated as calling up a few friends or people in your network to get their take, and going from there. They might even become your first customers.
Once you’ve developed your core offering and tested it with potential customers, you’ll probably encounter some surprises along the way. These are opportunities to learn. If your product is a hit with a particular—and lucrative—customer segment, or if your early customers like a particular feature or benefit, the next step is to consider how you can refine it for their needs. Repeat this process as often as needed. Only when you’ve identified your core product and your audience are you ready to think about what comes next.
