The product dilemma
Every company goes through an inevitable rite of passage, where its foundational tenets are tested and its fate sealed. Innovation as it is often romanticized, happens less from a glamorous conquest of the intractable, and more from a balancing act between the feasible and the fantastic.
Financing innovation is the key mantra for private equity, not from some lofty notion of spearheading growth. While this is the case for many VCs, the brass-tacks lie in the negotiation between a brilliant contrarian idea that can create tremors in the field, or an ordinary idea executed for optimum profit. And here lies the conundrum of innovation - startups that try to build something unprecedented, risk relevance in favor for one bold moonshot.
Consider Stripe as an example. When Patrick Collison and co. founded their fledgling idea, it was radical. Remember, we had closeted banking systems running on FORTRAN code. Ledgers that looked like a wasteland, systems rigged for massive frauds and unreliable data validation. Stripe wanted to change all that in one fell sweep.
They build a platform for businesses to monetize themselves quickly. Cutting through the tangled back-and-forth processes and regulations that chewed out all aspiring but resource-strapped businesses, they provided a miraculous highway that made payments a breeze AND helped identify financial fraud. This was a game-changer, and that precisely was the problem.
Securing funding led the team to skeptical firms who worried about PMF, traction, sustainability and numerous metrics that would ideally predict future returns. Only this isn't an ideal world, and Stripe wasn't a random startup. They made an asymmetrical bet, and secured funds following some legit traction, and that led them to an innovation flywheel. And today, the fintech landscape has changed forever, thanks to an asymmetric bet on innovation.
There are plenty of successes, and an even larger number of failures - some spectacular and some really silent. The ones that made audacious bets and failed despite securing funds, can all be linked to a fundamental gap that persists in the entrepreneurship world - the Product-Market fit.
To secure PMF is the greatest challenge for a company, and while I cannot conjecture on this in any capacity, I can safely label a thorn that has stuck through the mess persistently. It is the notion that the market is a solid, stateless background. Mach's principle holds great value here - everything affects everything.
Innovation is meant to solve a problem in a non-trivial way, but the capacity to handle this disruption is not uniform. The space of solutions tends to the lowest friction zone, a global minimum, where all supply-demand curves stop erratic oscillations and settle into one harmonious frequency. That sweet spot is the elusive zone that all startups aim for, and only a chosen few ever reach. Innovation thus, comes as a rite of passage, and the dilemma between a great product that nobody uses and a basic product that everybody does, defines this checkered game.
The asymmetric player always wins - if not in material, then in impact.