Comparing Solution-First and Business-First Founders
Originally a thread on X/Twitter:
Founders can be stereotyped into one of two general profiles.
In today’s funding environment one profile is likely to survive and thrive while the other will struggle and possibly die out.
Which are you?
Talented Founders want to change the world. They can spot and understand unsolved problems. They assemble solutions that address unmet needs.
In practical terms this means they can articulate a “problem statement” and a “solution statement” they want to focus on.
The problem statement is the Founder’s way of helping his/her audience internalize a problem they’ve discovered in their target market and an articulation of why it’s a gigantic and profoundly painful problem to a defined group of customers.
The solution statement is the Founder’s way of articulating a better way of solving the profoundly painful problem they described in the problem statement paired with whatever evidence they have that the end users agree (i.e. – market traction).
The art in tearing apart the problem statement is to figure out how profound the problem is and what subset of the market is willing to pay to solve it.
Founders typically overstate how painful the problem is and don’t always understand how large the addressable market is.
The art in tearing apart the solution statement is to figure out if the described solution is possible to build and if built is it “better by enough” to overcome inertia and friction.
Founders typically underestimate inertia and overestimate how good their solution is.
But Founders’ “reason d’etre” isn’t the same. Founders’ “ethos and drive” isn’t the same. Founders’ “mental mindset” isn’t the same.
And it’s these differences that differentiate Founders at the atomic level.
Solution First Founders
Many Founders exist solely to will into existence their solution. They get up in the morning ready to tackle the challenges of their problem and solution statements and obsess about delivering their offering to their target customers.
Business First Founders
Many Founders exist to build durable businesses. They know that the best way to build a great business is to solve a profound problem with a solution that a set of target customers is willing to pay more for than the solution costs to manufacture.
Both types of Founders focus on delivering solutions to profound problems, but only Business First Founders obsess about what it takes to build a durable business.
To them, building profitable, durable businesses is the goal, not just the byproduct of solving problems.
This matters in today’s environment because narrative heavy companies are going to struggle to attract the capital they need.
This matters in today’s environment because proving you’re “building a business” in more important than proving you’re “solving a problem.”
What this puts a premium on is a third “statement” that Founders make in their fundraising pitches: The financial statement.
The financial statement is a way of articulating the prize that everyone is playing for if the problem and solution statements are correct.
The art in tearing apart the financial statement is to figure out the key drivers of the financial outcomes and ground them to known analogues in the current ecosystem.
The more a model describes “existing norms delivered in a better way” the more believable the output is.
Unit economics matter more than Founders want to believe and not enough attention is typically paid to how the units are manufactured. Manufacturing costs are almost always underestimated and crush many startups as they scale.
Market penetration targets need to be put in the context of the competitive landscape and too many Founders assume that incumbents are slow and stupid and that customers will flock to their solution.
The truth is that inertia is a powerful force and a major drag on penetration.
The first step in building a profitable business is to be able to deliver a solution to a profound problem for less than it costs to manufacture and distribute. Positive unit economics.
The second step is to do this at scale in a big market. Positive company economics.
Solution First Founders focus all their energy on the solution statement while Business First Founders focus on the solution statement AND the financial statement.
And in today’s funding environment, Solution First Founders might not live to see if they’re right.
TL;DR: Building a business isn’t a charitable endeavor. It might be unpopular to say out loud, but the goal of business is to make money.
The best way to do this is to focus on building a cash generation machine that’s durable because it solves a profound problem efficiently.