How Not To Be A One Hit Wonder: On Building Your Second Successful Product
By Pedro Franceschi - Founder of Brex: The First Corporate Card for Startups
(First appeared on April 7th, 2019 in The Next Web)
In the Valley, there’s a perception that serial entrepreneurship is just a glamorized way of saying “serial failure.” And while ‘serial entrepreneur’ has a nice ring to it, just because you’ve been successful once doesn’t guarantee that you’ll be successful again. After all, not all lessons in one industry are applicable to different business models or markets.
For me and for founders like me, we are motivated to build companies that last. And to do this, it means expanding beyond your first product. If you’re running a high-growth startup, and you’re approaching double-digit market share and 10x growth, your company reaches a point where you need to build and expand your offerings and your audience, or die.
So how can you make sure that the market is ready for a new product or service, and what steps can you take to create a second, third, or fourth product line that not only thoughtfully incorporates what you have already built, but also provides your audience with value?
Avoid growing too fast too soon, or too little too late:
The top reasons for startup failure are consistent: lack of product-market fit, burning through cash, not finding the right team, or having the competition beat you to the punch. But the secret behind serial startup success is something that every entrepreneur struggles with. Qualities that makes serial entrepreneurs successful include their willingness to take risks, their resilience, and their ability to make a business decision before it’s comfortable.
Once you’ve established that you have product-market fit with your first offering, and your product is gaining traction, that is when you need to be considering your next move and find ways to complement your existing franchise. And while you’re building your next product, make sure that you don’t deprioritize your initial market, because your reputation and existing customer base are exactly what will help you develop, refine, and grow your business with your next market-ready product.
It’s important not to wait too long to make your next move. Waiting for the “perfect moment” can stagnate your growth, stunt employee morale, and give your competition an unfair advantage in ripe adjacent markets.
Find your synergy:
When you’re building your next offering, it’s not always about having a brilliant new idea or reinventing the wheel. Instead, you should be asking yourself, how can I better serve my customers? What would make their lives easier? How can I build something not only for the existing way in which I serve my clientele but that also expands my business into a new demographic or territory?
It’s really helpful to have a holistic understanding of your user base, their needs, and their pain points before expanding into your next offering. Square is an example of a company that did this very well, they knew their audience: small businesses. Year after year, top challenges that small businesses face include cash flow, hiring, and tax compliance. The team at Square realized that small businesses needed a way to process their payments, and they also needed access to capital and help with their payroll. While payments was the foundation of their company, their customer base informed how to expand their business. Some of the world’s most successful companies have taken this approach to building their empires.
Serve underrepresented markets:
At Brex, we’re a company that offers a corporate card for startups. My cofounder and I come from a payments background and launched our first payments startup in Brazil. When we moved to the US, we saw firsthand how difficult it was for startups to gain access to capital and lines of credit or credit cards. Existing credit cards were targeted specifically for small businesses, or giant corporations, and there wasn’t a credit card that was servicing startups’ specific needs.
As our business scaled-up, we looked at other like-minded, underrepresented markets. We saw that ecommerce companies faced many challenges in the world of credit. They needed to make regular high-volume, high-value transactions in order to pay vendors and keep large amounts of inventory available at all times. The scale and size of their transactions were different than other businesses, and they needed more flexibility and higher credit limits than existing credit card companies would allow. Creating a product offering for ecommerce companies was an extension and modification of what we were already doing. High-growth startups need to be looking at similar opportunities to augment their core competencies and what they are already known for.
It’s important to recognize that your first instinct is not necessarily your best. At first, we looked for ways to offer a short-term loan rather than the product we settled on, which was a credit card with higher limits and longer payment terms. While a short-term loan would solve our customers capital needs, it wasn’t differentiated and didn’t support any of the existing features we built in the payments space. Instead, we decided to modify our existing card product to better serve the working capital needs of ecommerce businesses, while also preserving the technology and operational infrastructure we built out for credit cards.
When you’re starting your second, third, or tenth product offering, it can feel like the odds are stacked against you. The pressure to succeed is high, and many people doubt your ability to be a repeat success: can you be more than a one hit wonder? But, by establishing product market fit, being willing to take risks, building off your core competencies, and expanding into complementary markets, you give your next company the opportunity to be as successful, if not more successful than your last.