Fast, hacky, and efficient — those have been both the strengths and the weaknesses of the celebrated Israeli startup culture. But that culture is maturing fast.
Scrappy and improvisational in the best way, many of our nation’s entrepreneurs still leverage the technical and leadership skills they learned in their military service to launch companies. But to compete successfully on the global stage, the best startups within our ecosystem are now thinking bigger than just building a handy feature fast and affordably—and, in many cases, selling out to an acquirer while their company is still relatively young. Instead, they are building large, sophisticated companies solving weighty technological problems and competing globally. Our startups aim to solve category problems, not just tactical point issues.
The purview has widened considerably, too. Our ecosystem now encompasses a much broader variety of companies in areas including collaboration software, e-commerce, cloud computing and application software in addition to our traditional strengths in cybersecurity and data analytics. Companies such as CyberArk, Fiverr, Sisense*, MyHeritage, WalkMe and Wix, all global players, have proven they’re here to stay (and scale!). Venture capitalists and public market investors are paying close attention.
So if you’re an entrepreneur with a promising, early-stage startup idea, here are four steps to make it germinate and, eventually, stick in our fast-growing, local ecosystem—and the broader global technology market as well.
1. Start testing the market today.
Ideas aren’t proprietary. You can’t own an idea; you can only own a business. So you need to start turning your idea into a business as fast as possible. That means testing it out on potential customers. This may sound obvious, but too many entrepreneurs don’t start this work early enough.
Start by developing a clear buyer persona. If it’s a B2B product, what type and size of company are you targeting? People with what job titles will actually buy the product? Get a sense of available budget and buyers’ propensity to spend real money to solve this particular problem. Are you selling them something they’ve bought before? Is this replacement budget or what we call “green field” budget for brand-new items? Does the problem your product solves affect just the buyer, his or her whole department, or the whole company?
So as my first challenge: Call at least 30 prospective customers, make your pitch, and encourage people to respond candidly. Would they actually buy your product? If not, why not? If you get any pushback from potential customers, probe the reasons why. It may be difficult to hear criticism, but at an early stage such feedback is solid gold. Use that information to refine your idea and how you pitch it. Maybe you need to target your customers at a different point in their budget cycle. Maybe your product is useful, but you’re not talking about it in the right way yet. Maybe you need to target a different type of organization, or a different persona within an organization. Whatever feedback you get should help you improve your idea and shape into a viable product. This is the beginning of how you achieve that all-important nirvana of product-market fit.
2. Build a platform, not just a feature.
The early phases of Israel’s startup success were driven by entrepreneurs who came out of the army with world-class technical skills. A lot of those entrepreneurs had deep expertise in, say, one specific aspect of cybersecurity. They started companies that zeroed in on one particular problem, and often ended up getting bought by bigger companies that needed that solution.
Today, the most successful—and fundable—entrepreneur is building a platform, not just a feature. Take Monday.com, for example. The company has never described itself as a project-management software company. Instead, the company’s tagline offers “a new way to manage your work”. That big-picture theme gives Monday.com the mandate to expand into a platform, and set out to change the way people work.
Successful entrepreneurs solve one problem with one product. Visionary entrepreneurs see how one product can start changing the world.
3. Quantify everything.
Capture as much data as possible. Track everything. Identify your key performance indicators (KPIs) and obsess over them. This will help you refine your idea faster–and it’ll impress potential funders when you’re ready for that step. Record calls (if that’s okay with the people you’re talking with). Make transcripts or detailed notes of all your conversations. It’s OK to give VCs raw notes or a call log. The value of this data is actually diluted if you tinker with it too much.
4. Know who to call.
Prepare thoroughly for that call, and for your pitch. Have someone on your team, or a fellow entrepreneur, play devil’s advocate for you—get them to ask you the toughest questions they can think of, so you’re ready to dig into the details about your product and where it fits in the market. Product-market fit is perhaps the most important factor in startup success, so you can’t be too wonky when it comes to sharing the data you’ve gathered from all that market research you did.
Prepare a package for potential funders that includes all the data you’ve gathered, and notes on your calls with potential customers. VCs will want to replicate your calls and test out the idea on folks they know in the startup space. Make sure they have all the information they need to do their own research and validate your findings. Talk them through any pushback that you got from potential customers, and explain how you’ve answered those questions or refined the product to better fit the customer’s needs. If you can prove that you’ve done your homework, you’ll be much more likely to get a favorable answer (and maybe your next round!).
This material is provided for informational purposes, and it is not, and may not be relied on in any manner as, legal, tax or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any fund or investment vehicle managed by Battery Ventures or any other Battery entity.
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The information above may contain projections or other forward-looking statements regarding future events or expectations. Predictions, opinions and other information discussed in this video are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Battery Ventures assumes no duty to and does not undertake to update forward-looking statements.
*Denotes a Battery portfolio company. For a full list of all Battery investments, please click here.