Downstream Thinking in Startups
How Keeping Your Eyes on the Primary Problem Can Make or Break Your Startup
As a founder, it's tempting to daydream about the bright opportunities your idea might unlock down the road.
Tyler Norwood from Antler recently posted about this on LinkedIn, discussing a trap many entrepreneurs fall into: they become so enchanted by the potential of their ideas that they lose sight of the problem they initially set out to solve.
Understanding why this misstep happens and knowing how to keep your focus on the primary can make the difference between your startup making it or not.
The Temptation of Future Possibilities
Tyler paints a familiar picture:
"If I could build a platform that does XYZ for my customers, then I would have all of this data and could do all these cool and profitable things with that data."
While there’s nothing wrong with dreaming big, problems arise when these future possibilities overshadow the primary problem your product is supposed to solve. This misstep often shows up in two ways:
Validation Misfocus: Founders can spend too much time validating demand for secondary opportunities instead of ensuring a solid need for the main problem their product addresses. This can lead to a product with exciting features lacking a fundamental purpose or market fit. The primary issue remains unsolved, and the product struggles to gain traction.
Pitch Misalignment: When presenting to investors, it’s easy to emphasize the glamorous future benefits—the potential for vast data insights, the possible expansion into new markets, and the myriad of ways to monetize the platform. However, it risks losing credibility if the pitch doesn’t clearly show how the startup will solve the initial, primary problem.
Keeping Your Eye on the Critical Path
These distractions can derail a startup, pulling founders away from solving the main problem for their primary customers. This downstream focus can also lead to underestimating how challenging it is to solve the primary issue in the first place.
A Real-World Example: Tokenizing Cap Tables
Tyler uses his own experience to illustrate this:
"I think there is a massive opportunity to tokenize the cap tables of startups. Instead of PDF contracts and excel tables, you have all the ownership, preferences, etc., on chain, perfectly transparent to everyone and settled automatically based on triggering events."
While the potential downstream benefits of this idea are huge—like having loads of data on private market transactions or automating security compliance for founders—these benefits don’t mean anything without widespread adoption. The real questions are: Do founders and investors want to tokenize their cap tables? Can a viable solution be built? Will they buy it?
The Takeaway: Prioritize the Primary Problem
Tyler’s key message is clear:
"Whenever you are thinking about a new idea, hold yourself accountable to focusing on the primary problem and primary customers only. That is and will always be the critical path. What is possible downstream is an academic exercise at best, a dangerous distraction at worst."
By staying laser-focused on solving the primary problem and serving your main customers, you’re setting your startup for success and the exciting downstream opportunities should come naturally once you get there.
My Thoughts on Downstream Thinking
I’ve seen this issue firsthand in my previous startups. It's easy to get caught up in the “what ifs” and lose sight of the core problem. When you’re passionate about an idea, it’s natural to dream about future features and business models and lose focus on the issue you initially set out to solve.
My advice to you:
Revisit Problem Statements: Regularly revisiting the initial problem statement and customer feedback helps stay grounded and aligned with the original pain point that inspired the startup.
Set Short-Term Goals: It is crucial to set short-term goals that directly address the primary problem. Breaking down the larger mission into manageable, actionable steps makes it easier to stay focused and measure progress effectively.
Maintain Team Focus: Keeping the team aligned through open communication and regular meetings where core objectives are revisited helps prevent drift.
So remember, stay focused and disciplined.
Address the primary problem first, and let the exciting future opportunities unfold naturally.
And never stop dreaming big, but remember to build on a solid foundation.
Special thanks to our sponsor:
Axented helps businesses design, build, and scale their products and teams worldwide.
With over 10 years of experience and a diverse portfolio of more than 300 projects delivered in over 15 countries, Axented has established itself as a trusted partner in the tech industry.
Renowned for its expertise and commitment to excellence, Axented provides innovative solutions to help businesses thrive in a digital world.
