At Forward Partners, an early-stage VC (our portfolio includes Lost My Name, Appear Here and Zopa), we have open-sourced our ‘secret sauce’ process that we use with each and every one of our investments. We call it “THE PATH FORWARD”. As much as we’d like to share with you a magic bullet to Uber-like world domination, no such thing exists. However, we’ve learnt that there is a path to follow that gives your business the best chance of finding product/market fit, raising capital, as well as accelerating towards Series A and beyond. This is the process we take all our idea-stage investments through. Enter… The Path Forward!
We’ve seen startups go through three distinct and important stages in their first twelve months. The first of these, Valid Idea, requires qualitative feedback from target users about your business’s value proposition. We help our companies perform many customer interviews, with questions designed to test our business hypotheses and eliminate as much uncertainty as possible. The more interviews you do the better your idea can be validated, as it helps test your assumptions and uncover others you may have overlooked.
“Our aim is to become the customer”
We wrote up a case-study featuring legal marketplace Lexoo which guides you through what kind of questions to ask.
Once you’re confident that your idea is valid, and your minimal viable product meets the identified need, it’s time for version 2 of your product. This usually increases the number of features over the bare minimum and helps you develop a growing, passionate fan base. We call this step Valued Product. Here you’re looking for signs that some of your customers are becoming evangelists. This could take the form of moments of unprompted praise on Twitter or alternatively receiving random emails of support from overjoyed customers!
The final step of The Path Forward is called Valuable Business. Here we’re focused on understanding your key startup metrics: customer acquisition cost (CAC) and lifetime value (LTV). If CAC < LTV it looks like you have ‘Scalable Economics’ and that means you’re ready to start rapidly growing the business - firing up your growth engine and accelerating to a Series A. This is a very brief overview of what is a long and challenging journey for most startups, however if you follow the advice at The Path Forward, you should be on the right track from Day 1. You can learn more about The Path Forward framework here and discover our in-depth, open source content here.