How to predict if a super early-stage startup will succeed — looking back at our first 100 founders at Tacklebox.
I tried early-stage VC a while back and I couldn’t get a feel for it. I didn’t see how people could identify successful companies that early. Honestly, I was skeptical that they could.
We recently hit a milestone at Tacklebox. We’re three years in with over 100 pre-product, idea-stage founders having come through the program. A bunch are successful, and a few are on their way to becoming really successful. The 100 startup mark seemed like a good time to reflect on these successful startups to see if any trends had emerged in their early days. I didn’t expect anything revolutionary.
But some interesting trends have emerged. Specifically, four characteristics shared by founders that have drastically outperformed.
Without exception, our most successful founders…
1. Have a clear North Star
2. Can visualize a great outcome for their customers
3. Run tests to maniacally collect data points
4. Leverage these data points to make trackable decisions
These may not come off as overly impressive, but the combination is rare. A tiny percentage of our founders have possessed them all, and every one of those founders is running a promising company.
When combined, the characteristics give the founder a superpower — I call it a Decision Machine. Making decisions is a skill. This machine helps them establish a process to consistently make good decisions — and get better (and faster) at making them over time.
These founders aren’t superhuman — they’re certainly smart, driven, and pursuing the right idea for them — but building the characteristics listed above are 80% mindset and 20% skillset. Like so much of entrepreneurship that people assume is innate, establishing this process is teachable and learnable.
And after looking back at these founders — I think their success might be more predictable than I’d thought.
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Paddling at Night
Being an early-stage founder feels like being in a rowboat in the middle of the ocean in the dead of night. You’re paddling, but you’ve got no idea if you’re headed in the right direction. Seth calls this entrepreneurial right of passage The Dip (you should read that). The journey from “no one cares about your product” to “lots of people care a lot about your product” is unpredictable, and reaching the destination is not guaranteed.
This is… stressful. Lots of founders quit during the dip. Not because they lack motivation, but because the decisions they make lack context. Gathering enough feedback on decisions you’ve made before you’ve got a somewhat mature product is tough — so founders are flying (paddling) blind.
The Dip is hard because everything feels ambiguous. There are no obvious decisions. Building a process to cut through this ambiguity is critical. And it starts with a core question.
North Star
The first question I ask founders applying to Tacklebox is a straightforward one: “Why are you working on this?” Only one answer has a shot.
Product focused founders. “I want to build the Warby Parker for candles.” The majority of founders I meet are product focused. Their startup idea popped into their head as a fully fleshed out product, and they’re looking for resources to build that product. This is trouble.
There are few constants in the startup world, but one is that the first product you build will stink and no one will want it (sorry 😕️). Customers will be indifferent to the first candle release. Product focused founders response to indifference is to double down on product — they add features or pivot to B2B or B2B2C or anyone other combination of letters that might like to remove that darned candle middle man. They’ll push their product idea until they’re out of patience / resources.
Customer focused founders. “I want to help incredibly successful women establish lasting wellness routines so they can continue their impressive trajectories in a healthy way.” This is the North Star for a recent Tacklebox founder (👋, Ilse). I don’t know if she’ll be successful — she’s still very early in the process — but this customer and problem is infinitely motivating to her. She’d happily work on Habit House for the next 25 years in whatever form it takes.
Ilse, and other customer-focused founders, will react to indifference different than product focused founders. If her customers don’t respond to a product, it’s the product, not the customer. She’ll double down on helping that customer, and try something else.
I’m yet to see a product focused founder succeed. I’m sure it’s happened, but not at Tacklebox. I’d only suggest starting a company if you’re motivated by the purpose behind it.
Trust the Process.
If I asked you to talk to a cute girl in your yoga class, it’d be stressful. You’d delay it for a few weeks, it’d take up a ton of headspace, and you’d stink at yoga until you did it. Maybe I’m just projecting.
But if I asked you to speak to a girl in your yoga class because 10 years from now you want to be married with kids and speaking to people with similar interests is the best way to do that — it’d be easier. If I also told you a funny joke to lead with and a few facts about her, it becomes a no brainer.
Humans stink at new things, but we’re great at things we’ve done before. This is why building a process, your Decision Machine, is so important.
The decisions you make need to be based on data you get from your customers actions. You need to operate from first principles, not assumptions. But telling you to do this is like telling you to talk to a girl in the yoga class cold. It’s overwhelming. Our founders build a process to make it less taxing, and making decisions on real data points is the differentiator.
I have steadily endeavored to keep my mind free so as to give up any hypothesis, however much beloved, as soon as the facts are shown to be opposed to it — C. Darwin
Characteristics 2, 3, and 4 work in concert to build the machine, gaining information from your customers actions so you can make decisions that actually move you towards your North Star. The goal is to create a repeatable process you lean on to make big decisions, making every interaction with your customers count.
2. Can visualize a great outcome for their customers
When I ask Ilse what her goals are for the week, her answer might be “get 20 new users.” When I ask why, she’ll say “so I can test the best way to get them to work out 3x this week.” Ilse knows what a 7-star experience is for her customers, and she’s working on getting them to that point.
Working out three times a week is an amazing outcome for customers currently working out 1x / week. Focusing on specific, achievable outcomes makes a daunting process start to feel manageable.
3. Run tests to maniacally collect data points
Ilse is constantly setting up and running tests to understand actual customer behavior. She’s balancing the clouds and the dirt — her big, lofty goal of helping women reach their potential (clouds), with the execution of daily and weekly tests that will eventually get her there (dirt).
In this case, she’s trying to get her customers to go from 1 workout / week to 3. Her hypothesis is that having her customers schedule workout times for the week each Sunday, then checking in via text message after each, will create external accountability and they won’t miss workouts (the behavior her customers want).
But just monitoring workouts isn’t nearly enough. She schedules 5 minute calls with each customer every Sunday to understand how they feel. Is this workout schedule sustainable? What are they sacrificing? How do they feel? If Ilse’s goal for customers is wellness, she needs qualitative and quantitative data.
Our best founders are maniacal about customer data. Every interaction is a piece of the puzzle, and watching customers interact with the problem they’re solving is their best use of time.
4. Leverage these data points to make trackable decisions
Ilse will use the results of this test to decide on features. But she’ll also test a bunch of different methods to deliver the same result. She’s got an extensive CRM in Airtable (a must for founders) tracking customer interactions that help her make decisions.
Ilse works on her startup rather than in it — building systems that will help her understand how to best serve her customer. These systems get her valuable data while freeing up her time to think critically and creatively about her customer.
Startups are mentally exhausting. The Decision Machine takes pressure off by reframing success. For Ilse, success isn’t if all 20 people workout 3x in a week. It’s if she gathers data points — if she’s able to understand how her customers act in that situation. Every test is a success, because the goal is data. Replacing failure with learning may be the biggest reason these founders are able to navigate the dip so well.
So, can you predict?
The million dollar question (literally). Can you predict which startups will succeed this early in their existence?
I’m still skeptical. But if you can identify a founder that’s built a Decision Machine, they’ve got a big time leg up. Every action they take is amplified, as it will help them build for the present and the future. They’ll be stronger mentally. And if they can gather data from customers and make evidence-based product decisions lightning fast, a product with traction probably isn’t far behind.
