This article is a part of the book “A Pattern Language for Successful Entrepreneurial Ecosystems.”
Non-technical founders face a catch-22 situation where they need help to build a product to showcase the value of their idea to investors, but no investor will invest before they see a testable product.
One way to break out of this dilemma is for non-technical founders to demonstrate the value of their idea outside of a technical product. This demands a shift in seeing a start-up as an organization created to build a product to the start-up as a testable process with a product as one component. The goal of the Startup Loop Diagram’s is a mental reorientation of what a start-up fundamentally is. When the goal of a start-up shifts from product to repeatable process, the power between technical and non-technical founder can also shift if the non-technical founder can demonstrate a repeatable process without a technical product.
The current standard of how founders organize their ideas for their start-up is the Business Model Canvas, created by Alexander Osterwalder and Yves Pigneur in their book Business Model Generation in 2010. At the time the Business Model Canvas was revolutionary. Before the Business Model Canvas the standard in the business community was for founders to generate ten to twenty page business plans, complete with five and ten year costs and revenue projections. But as computing costs became lower and coding languages more efficient, start-ups would often find that they could build and test an idea in the two or three weeks it would take to develop a new business plan. The Business Model Canvas helped founders lay out their hypotheses, and then get to work building. Just one piece of paper helped reorient the entire business community around a new way to build that was faster and leaner. This is the power of a mental structure to be able to change people’s schemas about entrepreneurship in a way that increases the effectiveness of their actions.
The problem with the Business Model Canvas is that once all of these hypotheses are down on paper there is still a huge mental leap from idea to building a company. It is perhaps time for the start-up community to once more rethink the mental structures used to help founders in the first stages of thinking about their companies.
The Start-up Loop Diagram is the next step in the creation of efficient mental structures for start-up founders. It helps founders not simply organize components that should be in their companies, but shows the relationships between these components in a way that guides the founder’s actions through the cycle.
With a new mental schema that stresses the development of a repeatable process over a product, non-technical founders have more flexibility in how they can demonstrate value. The non-technical founder’s product might not be a product at all, but a knitting together of various products, a service, or a non-technical version of their proposed technical product. As long as their business model creates a repeatable cycle of revenue, they have created demonstrable value.
The second component of the diagram are the potential actions a founder can take after each cycle. Founders can expand their operations, perhaps by getting more potential users in their marketing funnel. They can make their operations more efficient by designing a website with fewer screens that they need to build, which means lower development and maintenance costs. Or, they can choose an entirely new approach to customer retention, such as switching from upselling to cross-selling.
Together these two images sum up the primary actions and flows innate in starting a company: the process of building hypotheses across four main quadrants, and in turn making some sort of redistribution of money, time, or attention to be more expansive, more efficient, or to take a new approach based on the results of these hypotheses.
Making the Unseen Seen
Mental pictures have incredible power. When you can see the marketing and awareness, the sales model, product, and the customer service all connected together as a flow that impacts each other piece, it helps to understand what a company is differently. A company can be seen as not a digital product that a technical person creates and then turns over to a non-technical person to sell. A company can be understood as a repeatable hypothesis of how value is generated, with each piece only as important as its contribution to the whole. This shift can reorient the dynamic of a non-technical founder to a technical founder to be able to help non-technical founders explicitly showcase their value. This diagram can also help to demonstrate to investors how an idea has merit before investment if a non-technical founder can showcase customers passing through the engagement loops with the company even without a technical product.
But most importantly, a mental structure that positions a non-technical founder as having an active role can reorient non-technical founders in their own minds. They are no longer people with “just an idea” waiting for a technical founder. They are start-up scientists and hypothesis testers, with the power to build the companies they want to see in the world.