The journey to becoming (and investing in) start-ups that become new market category kings
Welcome to a test process to determine, if and when, your startup can reach product-category fit (PCF) – which is product-market fit in a new market category – and prepared for a successful Series A round.
First, some context:
A typical startup journey, begins life ever-hopeful, as it attempts to ‘cross the charm’ in search of a market and traction, with very few reaching this ‘promised land’
We’d like to take you through a product-category fit test process, a journey to assist startups to cross this chasm with more certainty, or highlight fatal market adoption risks early-on.
We will also describe how early-stage investors can take options, on these high-potential category kings whilst on the journey.
The test journey typically takes between 6 – 18 months to complete, and culminates in a successful Series A round
Our narrated product-category fit journey series follows, also known as a start-up’s journey to becoming a new market category king
TEST 1: Category Test
Test 1’s primary objective here, is to assess logically if success is indeed one of the probable outcomes. The test seeks to determine if a significant limitation for a large enough market exists, which can be diminished or removed by the start-up, which by default, would result in the creation of a large new market category – the ultimate prize.
If we’re able to understand if a significant limitation can be removed by your start-up innovation, then it opens up uncontested space (in other words a new market category), where a new way of life is to be found, and a whole new world of possibilities thus created, by default.
Here TMARA’s approach is altogether different. We do not look to solve big problems, nor address wants or unmet needs as is current startup best practice. We’re looking rather, for a very unique type of problem – it’s called a limitation, and our testing process start point begins here, and consequently the rest of the journey to becoming a new category king is guided thereby accordingly.
If no significant limitation exists, this would be an immediate PCF show-stopper, right here at test 1.
Testing positive here, however, means the start-up has the DNA for possible success, signalling that the start-up has earned the right to continue, and progress to test 2, to see if it can potentially become a ‘must-have’ in its new found market category.
TEST 2: MUST-HAVE Test
Once we’ve confirmed that success is a possible outcome, then frankly-speaking, the rest of the tests (including this one) are designed to effectively try to fail the start-up quickly, if we discover through the PCF testing process, that any fatal market adoption obstacles may come to light.
Test 2’s objective here, is to test if the startup’s new innovation can now become a must-have (not just a nice-to-have), inside that large potential new category. This is TMARA‘s proprietary MVV validation process, where we test if the market can adopt a whole new way, making your innovation an absolute ‘must-have’.
The test involves proving that the new market can actually adopt the new way, and in our control to do so.
We are looking for the new-rule adoption showstoppers here, otherwise we process to test 3.
TEST 3: 10x Test
Once we have validated the level at which the market itself considers your innovation to be a real ‘must-have’ for them, we move to the product testing phase now.
Test 3 here validates being able to remove the limitation technically for the market, because this would, by default, render any current best practices and beliefs obsolete.
The test here is to take a sample of customers experiencing the new way, who must confirm that after what they have experienced with your innovation, their current beliefs and practices serve no further purpose.
Passing test 3, means we have validated a 10x level of technical performance from your new product or MVP, and have confirmed that it does indeed enable a new way for the market.
TEST 4: New Rule Test
Test 4 continues to focus on your MVP, this time to confirm it truly “does what it says on the box”, in other words tests that by adopting the new rule we provide the market with, the market will realise the full value of your innovation, by default.
This test focuses on a sample of customers indicating how much value they realise by adopting the new rule, because a lack of the full realization of value, will be a showstopper here for us.
If we lack the value features in the MVP and it doesn’t do what it claims to, then the startup fails test 4, and exits the product-category fit process here unfortunately.
TEST 5: Guarantee Test
Welcome to test 5. To this point, we have tested for a large enough new market category, into which you can become a must-have, and validated that your new product can perform to the market’s must-have spec.
Now we test the market’s perception of value, and its willingness to embrace the new way, which will extract the full value of the innovation.
Here we are testing that the value economics hit the market’s sweet spot, because if it does, then the PCF show certainly goes on.
TEST 6: Rate Test
Crossing the chasm successfully, at this point, means passing this next challenge, test 6. Can we develop an un-refusable offer for the market.
Our guaranteed value must count, and have very little risk for customers, especially because you’re new to the market and this value guarantee serves as a new reference point.
Test number 6 validates that the value guarantee actually counts, and causes a high enough sales hit rate.
Achieving a below, say a 60% sales conversion rate in the market, will be a showstopper here, and this would be a fatal flaw to becoming a new market category king, even this close to the PCF finish line.
Sales must not struggle to sell the value of your new innovation, and the message to the market must result in accelerated traction, by default, because your innovation has become inevitable.
TEST 7: Prom Test
At this exciting stage of the journey to becoming a new market category king, we can sense the promised land – more specifically reaching product-category fit moment.
But let’s not get ahead of ourselves, however, because we have 2 important tests to complete still, as both of these tests will prove, or not, if you can become the new way.
Test 7 is where we execute, what we call, a category defining lightning strike event. Like the name suggests, the “lightning strike event” is a high impact event, placed strategically for the highest impact within the target market eco-system’s domain, which is unashamedly self-promotional in nature.
It serves to declare in no uncertain terms that there is a new innovation in the market, that it comes with a new rule that must be adopted to realise its value, and there is one new emerging king in town, and you’re it.
Igniting the market, and establishing your dominion in the minds of your new market is what test 7 is seeking to do, and should you achieve this, then all that remains in the journey to become an emerging new market category king , is to, well, pass the final 8th test… so let’s get straight to it….
TEST 8: WoM Test
We’re at test 8, and the moment of truth has arrived. Let’s cut straight to the chase…we have proven there is a large new market category, into which you can become a must-have. Your product also does what it says on the box, your offer to the market is un-refusable.
Now the market needs to actually pull it out of your hands, so to speak, through a powerful word of mouth, so your compound sales growth rates and satisfaction levels tip the system in your favour, and you’re ready to scale, after a successful series A investment round.
With growth rates and customer satisfaction levels high as a result of testing positive in the last and final 8th test, we have now reached product-category fit, and can claim to have become an emerging new market category king.
Well done, your journey is now complete, and our work here (certainly in this phase) is done.
Thank you for following our product-category fit process, and the opportunity of describing the start-up’s journey to becoming a new market category king
For further information, a chat with one of our PCF experts or details on a local MCG, please go to www.tmaragroup.com and we’ll set up a call or a coffee at your convenience.