Startups questions, answered
39 short answers from 8 guides. Each set links to the full guide for the worked examples and the reasoning behind the answer.
Choosing a Startup Idea: The Idea Maze, Scoring Matrices and Pivots
How do I choose between several startup ideas?
Score them side by side in a weighted decision matrix before you fall in love with one. Rate each idea from 1 to 10 on criteria such as impact, effort, confidence, market size and founder market fit, weight the criteria, and compare the weighted means, inverting effort so easier ideas score higher. Then change the weights to check whether the ranking is stable.
What is RICE scoring?
RICE is a prioritisation formula from Sean McBride at Intercom: Reach x Impact x Confidence / Effort. A feature reaching 2,000 users per quarter, with impact 2, confidence 80% and effort 4 person-months, scores 2,000 x 2 x 0.8 / 4 = 800. RICE suits features with measurable reach inside one product, not choosing which company to start.
What is the difference between RICE and ICE scoring?
RICE multiplies Reach, Impact and Confidence and divides by Effort, and comes from Sean McBride at Intercom; it suits features with measurable reach. ICE, associated with Sean Ellis and growth experiments, combines Impact, Confidence and Ease, each rated 1 to 10, for fast ranking of experiments. Neither suits whole startup ideas as well as a weighted decision matrix.
What is a startup pivot?
Eric Ries defined a pivot in The Lean Startup (2011) as a structured course correction designed to test a new hypothesis about the product, strategy or engine of growth. A good pivot changes one thing and keeps what was learned; changing customer, problem and business model together is really starting a new company. Dated milestones show whether a pivot is working or drifting.
What are the types of startup pivot?
Eric Ries listed ten pivot types in The Lean Startup: zoom-in, zoom-out, customer segment, customer need, platform, business architecture, value capture, engine of growth, channel and technology. A zoom-in pivot, for example, is when one feature becomes the whole product. Changing one thing at a time, and keeping what was learned, is what separates a pivot from starting a new company.
Design Sprint vs Foundation Sprint: How the Two Knapp Sprints Work
What is a Foundation Sprint?
A Foundation Sprint is a 2-day workshop that decides what to build and for whom, before a Design Sprint tests a solution. Jake Knapp and John Zeratsky developed it at Character Labs, their venture studio, and described it in the book Click (2025). It covers the customer, the problem, the team's advantages and the real competition, and ends in a Founding Hypothesis.
What is a Founding Hypothesis?
A Founding Hypothesis is the one-sentence output of a Foundation Sprint: "If we help [customer] solve [problem] with [approach], they will choose it over [competitors] because our solution is [differentiators]." The sentence is deliberately testable, because every blank is a claim that a later experiment or Design Sprint can confirm or break. It is a bet, not a slogan.
What is the difference between a design sprint and a foundation sprint?
A Foundation Sprint lasts 2 days, answers what to build and for whom, and produces a Founding Hypothesis without needing customer contact. A Design Sprint lasts 5 days, answers whether a solution works for real customers, and produces a tested prototype plus findings from five customer interviews. Run the Foundation Sprint first if you cannot yet state your customer, problem and difference in one sentence.
What is the Decider in a design sprint?
The Decider is the person with the authority to make the final call on Wednesday of a design sprint, usually the CEO or product owner. After the heat map, speed critique and straw poll, the Decider casts a supervote. Without a Decider, a team tends to vote for the safest compromise and tests something nobody loves.
What is Crazy 8s in a design sprint?
Crazy 8s is a sketching exercise in which each person draws eight variations of an idea in eight minutes. In a design sprint it is part of the four-step sketch on Tuesday, after notes and rough ideas and before a final three-panel solution sketch. Everyone sketches alone, which avoids the loudest-voice problem of group brainstorming.
How to Fill In a Lean Canvas, Box by Box
How is a Lean Canvas different from a traditional business plan?
A Lean Canvas fits a business plan's thinking on one page that takes about 20 minutes to fill in and about 2 minutes to change, while a first business plan often takes three weeks and runs to 40 pages. That speed is the point: the Lean Canvas is meant to be rewritten every time you learn something from customers.
What goes in the Problem box of a Lean Canvas?
The Problem box holds the top one to three problems your customer has, plus a note of how they solve them today, because that existing alternative is your real competition. Fill it in first, together with Customer Segments, so the problem is not reverse-engineered to justify a solution you have already chosen.
What makes a good unique value proposition on a Lean Canvas?
A good unique value proposition is one clear sentence on why you are different and worth attention, and a stranger should be able to repeat it after reading it once. It states the outcome the customer gets, not a feature list: "AI-powered dashboard with integrations" describes a product, not a reason to care.
What key metrics should a Lean Canvas include?
A Lean Canvas should list the few numbers that show the business is working. For SaaS this is usually acquisition, activation, retention and revenue. Avoid vanity metrics such as page views and sign-ups, which feel good but rarely predict revenue, and pick metrics that move only when customers get value.
How to Split Co-founder Equity (and Agree Before You Argue)
What happens to a co-founder's equity if they leave early?
With standard four-year vesting and a one-year cliff, a co-founder who leaves before month 12 keeps nothing, and one who leaves later keeps only what has vested. A founder with 42.0% who leaves at month 18 keeps 18/48, or 37.5%, of those shares, about 15.75% of the company, and the rest returns to the company.
What is dynamic equity splitting?
Dynamic equity, as in Mike Moyer's Slicing Pie model, tracks each founder's contributions over time and adjusts shares until the company reaches a defined milestone, such as a priced funding round. It suits teams that genuinely cannot predict who will contribute what, at the cost of more bookkeeping than a fixed equal or contribution-based split.
How much equity should the founder with the idea get?
An idea is worth little without years of execution, so it should not drive the co-founder equity split. In the RedBison Co-founder Equity Split Calculator's contribution scoring, the idea earns 5 points out of a possible 25, against up to 5 each for execution, cash, experience and risk, and even that is described as generous.
What should co-founders agree on before splitting equity?
Before splitting equity, co-founders should agree on whether they want the same company: vision, mission, core values, goals for the next 12 months, biggest concerns, time commitment and expected equity. Most co-founder breakups are about ambition or hours rather than percentages, such as one founder wanting a lifestyle business and the other a Series A.
Should founders set aside an option pool before splitting equity?
If the company plans to hire, founders should either split less than 100% so an option pool is reserved first, or agree how they will be diluted when the pool is created. The RedBison Co-founder Equity Split Calculator supports this with a Total Equity Pool setting that can be set below 100%.
LTV:CAC and CAC Payback: Unit Economics With Real Numbers
What are unit economics for a startup?
Unit economics compare how much gross profit a customer brings in over the relationship (LTV) with how much it cost to win them (CAC). Investors read the LTV:CAC ratio together with CAC payback, the months it takes to earn the acquisition cost back. They catch a startup that grows fast while losing money on every customer.
How do you calculate LTV for an e-commerce business?
For an order-based business, LTV is average order value × orders per year × expected lifespan in years × gross margin. A shop with $75 orders, four a year, a two-year lifespan and 40% margin has an LTV of $75 × 4 × 2 × 0.4 = $240. Subscription businesses instead use ARPA × gross margin ÷ churn.
Why can two companies with the same LTV:CAC ratio be very different?
The ratio ignores how long cash is tied up. Two companies can both have $1,600 LTV, $500 CAC and a 3.2:1 ratio, but one earning $80 a month of gross profit per customer pays back CAC in 6.25 months, while one earning $40 takes 12.5 months and needs twice as much cash to grow at the same pace.
What is blended CAC and why can it be misleading?
Blended CAC divides all sales and marketing spend by all new customers, including free signups from word of mouth. Those free customers make paid channels look cheaper than they are, so blended CAC hides bad channels. Work out customer acquisition cost per channel, using spend and customers won in the same period.
How does monthly churn translate into customer lifetime?
With a constant churn rate, the average customer lifetime is 1 ÷ churn. At 5% monthly churn the average customer stays 1 ÷ 0.05 = 20 months, so $100 a month brings in $2,000 of revenue. Cutting churn from 5% to 4% lifts SaaS LTV from $1,600 to $2,000 at 80% gross margin without changing CAC.
MVP vs MLP vs MMP vs SLC: Choosing What to Launch First
Who coined the term minimum viable product?
Frank Robinson coined the term minimum viable product in 2001. Eric Ries made it famous in The Lean Startup (2011), defining an MVP as the version of a new product that lets a team collect the maximum amount of validated learning about customers with the least effort. Its output is learning, not revenue or delight.
Should I build an MVP, MMP, MLP or SLC first?
Build an MVP if you cannot yet say who the customer is or whether the problem is real. Choose an MMP if you know both and need cash flow. If the problem is real but already solved by others, an MLP or SLC fits, and the difference is mostly whether you lead with delight (MLP) or with finished scope (SLC).
Who created the Simple, Lovable, Complete approach?
Jason Cohen proposed Simple, Lovable, Complete (SLC) in a 2015 essay on his blog A Smart Bear as a replacement for the MVP. He argued that customers hate MVPs because they are incomplete by design. An SLC product does one narrow job fully, often doing less than competitors but doing it completely.
Is an MVP the same as a version 1.0?
No, an MVP is not a version 1.0 with a humble name. A minimum viable product is built to test one specific assumption, so if a release takes more than about three months and nobody will learn anything specific from it, it is not minimal. A landing page, a hand-run concierge service or a clickable prototype can all be MVPs.
How do I decide whether a feature is a must-have?
A useful test for a must-have feature is whether you would delay the launch for it. If not, it is a should-have. Marking everything must-have makes prioritization meaningless, and in the MVP, MLP, MMP and SLC Launch Planner a plan with nine must-haves triggers a warning to cut scope.
TAM, SAM and SOM: Sizing a Market Top-Down and Bottom-Up
What is an example of TAM, SAM and SOM?
Take a scheduling add-on for veterinary clinics at $3,600 a year. With 30,000 clinics, TAM is 30,000 × $3,600 = $108M a year. If the add-on integrates with systems used by 40% of clinics, SAM is 12,000 clinics or $43.2M. Winning 3% of SAM, 360 clinics, gives a SOM of about $1.3M a year.
How do you calculate TAM top-down?
Top-down TAM starts from a published market figure and slices it by the share your product addresses. If an analyst report put veterinary practice software at $2B a year and scheduling tools at about 5% of that, top-down TAM is $100M. Use it as a cross-check on a bottom-up count of buyers times annual contract value, and explain any large gap.
Why do investors dislike the "1% of the market" argument?
"If we get just 1% of a $50B market" skips every step that matters. Investors have seen that slide hundreds of times. SOM should come from capacity and conversion instead: how many deals your team can close, from how many leads, at what win rate, within a set time window.
Should TAM, SAM and SOM be annual figures?
Yes. TAM, SAM and SOM are all annual revenue figures, and a slide that mixes an annual TAM with a five-year cumulative SOM makes the ratio between them meaningless. Watch prices too: 15 million users × $25 a month is a monthly number, so multiply by 12 or use annual revenue per customer from the start.
What is the difference between SOM and revenue?
A SOM built from category spend is not revenue at your price. If clinics spend $12,000 a year on all practice software, a SOM of about $3.7M covers roughly 306 clinics, but a product priced at $3,600 a year earns only about $1.1M from them. Both numbers describe the same clinics, so never quote the larger one as revenue.
Validating a Startup Idea: Interviews, Surveys and Competitors
How do you validate a startup idea?
Write down the three or four riskiest assumptions behind the idea, each with a number that could prove it false, and set pass criteria before any results arrive. Run five to ten customer interviews about past behaviour, record the alternatives people mention, then survey to measure how common each answer is. If the evidence clears the bars, test for money or real effort.
Should I interview customers before sending a survey?
Yes. Interviews show whether a problem is real and give you the words customers use and the options that matter, while surveys only measure how common an answer is once you know which answers to offer. Surveying first means offering the options you imagined rather than the ones customers have. Five to ten interviews with the right people usually show whether the problem is real.
How do I write a testable startup assumption?
Write each startup assumption so it could turn out false and put a number in it. "Freelance designers lose at least two hours a week chasing late invoices" can be checked in interviews, while "designers hate invoicing" cannot. Then set a success criterion in advance, such as at least 12 of 20 interviewees naming the problem unprompted, so the goalposts cannot move.
What counts as strong evidence when validating an idea?
Evidence that reflects what people do beats what they say. From weakest to strongest, validation evidence runs from compliments and opinions, to survey intent, to interviews about past behaviour, to sign-ups with an email, to pre-orders or payments. An email address is a weak commitment, while a deposit or a signed letter of intent is a strong one.
Who are a startup's real competitors?
A startup's real competitors are whatever customers use today, which is often not a similar product but a spreadsheet, an assistant, an agency or simply putting up with the problem. If 8 of 12 interviewees use a spreadsheet, the spreadsheet is the main competitor. Write rivals' weaknesses in the customer's own words and look for gaps most of them share.