How to Create A Value Proposition: A Four-Step Framework | VC Jobs
Gmail Creator's 90/10 Rule & Amazon's Decision Making Framework From 2015 Shareholder Letter....
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Deep Dive: How to Create A Value Proposition: A Four-Step Framework
Quick Dive:
Gmail Creator Paul Buchheit’s 90/10 Rule For Your Startup.
Amazon Decision-Making Framework
"The Half-Truth of First-Mover Advantage” - Steve Jobs
Major News: Ex-Military Joining VC Firms Like a16z, Reliance Considers Jio IPO, Microsoft, Apple Ditched OpenAI Board Observer Seat & Index Venture Raised $2.3 Billion VC Fund…
Best Tweet Of This Week On Startups, VC & AI.
VC Jobs & Internships: From Scout to Partner.
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TODAY’S DEEP DIVE
How to Create A Value Proposition: A Four-Step Framework
Your value proposition is at the heart of all your go-to-market activities in the startup stages of the business. If you get it right, and truly nail it, then it becomes this inspiring thing that will help you sell more, raise more, and clarify for everyone—including your people, what the urgent problem that you’re solving is.
The value proposition is what defines the business model of your company, and explains how it will generate revenue and profit. It explains who your customers will be and why they will use your product.
Investors won’t look twice at a company that hasn’t nailed the value proposition. After all, if you don’t know what is going to make your startup unstoppable, why should they back it?
So, if you want your startup to get off the ground and fly, you’re going to want to put some effort into the value proposition right at the start.
Image Credit: Cathy Dawiskiba
It’s hard - coming up with a value proposition when you haven’t yet got the market-ready product is hard. Don’t let this get you down. Get the pot of coffee ready, put whatever tunes on that get you in the mood to concentrate, and settle in for a session.
While crafting a value proposition demands careful thought, the approach is surprisingly simple. A concise four-step method provides all you need to complete a value proposition canvas. This process will guide you to distil your insights into a single, powerful sentence that captures your offering's unique worth.
The value proposition canvas tool looks like this:
What this tool does is help you to focus. You want to focus your strategy on that magic fit between what you’re going to be making and why people will buy it. You break those two things down and there’s only a couple of elements to each. And that’s why it’s so important that you address all of them—all six of them above—within your value proposition.
Think of it like a paint-by-numbers game. The picture isn’t finished until every bit of the canvas is fully painted.
The next question you’re going to have is how you go about getting the paint onto the canvas. Here’s a simple approach:
1) Start with the problem..
Why are you creating this product? What's the purpose of your startup? It's all about tackling a pressing issue that people - your future customers - are facing. Take Airbnb, for example. They saw a problem: expensive hotel rooms and a lack of unique, local accommodation options for travellers. That was their starting point.
Why go through this step? Because too many startup entrepreneurs lead with “our product does…”—and that’s not the right approach.
Assume that people don’t want more products. We’re all already spending too much on too many products as it is. Assume that people want to be able to solve problems, and are willing to spend money to achieve that solution. That’s the point of step one. It gets you thinking in the right direction.
2) Ask yourself what is the risk associated with the problem
Ask yourself: "What happens if someone doesn't fix this issue?" This is crucial because while you've identified a pressing problem, you need to understand its real impact.
Some problems have bigger consequences than others. For instance, think about a company like Dropbox. They tackled the problem of file sharing and storage. Without a solution like theirs, people risked losing important files, struggled to collaborate on projects, and wasted time trying to share large files.
This step is key because it gets to the heart of your value proposition. If you can get a potential customer to realize, "We're wasting hours every week on file management, and it's costing us money," and then show them your solution, you've got their attention.
It's about making the pain point clear. When people see the real cost or risk of not solving the problem, they're more likely to see the value in your solution. This approach helps you connect with your customers on a deeper level, showing that you truly understand their challenges.
3) Now it's time to look at your product through the lens of problem-solving.
Start by listing your product's features and benefits, but don't stop there. The key is to connect these to the problems you've identified in steps one and two.
Remember, your potential customers or investors aren't going to be excited by a dry list of features. They'll love those once they're using your product, but to grab their attention initially, you need to show how these features solve their problems.
Let's take Slack as an example. They could list features like channels, direct messaging, and file sharing. But what's more important is how these features solve communication problems in the workplace. How do they reduce the time wasted on endless email chains? How do they improve team collaboration?
Ask yourself: How completely does your product address the problem? The more thoroughly you solve the issue, the more interested people will be. If Slack can show that its platform practically eliminates the need for internal emails and dramatically improves team productivity, that's a powerful proposition.
This step is about making the connection clear between your product's capabilities and the customer's needs. It's not just about what your product does, but how it makes their problems disappear. That's what will catch their attention.
4) Finally, prove it
This will be something you add to your value proposition later, once you’ve got customers, but proof that the solution works and delivers what you’re promising will be critical as you start to scale the business. Customer case studies that hone in on the problem and solution can help to explain in real terms the benefits of giving you their business.
So, make sure that some of your first customers become case studies that highlight what you’ve done for them. Future customers will expect to see this.
Once you’ve completed these steps, you’ll then be able to “paint” in the value proposition canvas. From there, the last task is to take that information and summarize it in no more than two sentences that can be recited in 30 seconds.
Some great examples of value propositions
Slack: "Make work life simpler, more pleasant and more productive."
Slack took the messy world of work communication and made it fun and efficient. They saw the problem of fragmented conversations across different apps and solved it by creating a single, user-friendly platform. It's like a social media experience but for work.
Grammarly: "Great writing, simplified"
Grammarly nailed it with this straightforward promise. Instead of getting technical about AI and spell-checking, they focused on the result: better writing. It's a simple, powerful message that resonates with their target audience.
Uber: "The smartest way to get around"
While not a startup anymore, Uber's early value proposition is worth noting. They identified the hassles of traditional taxis - unpredictable waiting times, payment issues, navigation problems - and offered a smart, tech-driven solution. Their message implies convenience and efficiency, addressing the core problems of urban transportation.
Remember -
The value proposition is not about selling your business. It’s about selling what the business will do for the customer. This customer-centric statement proves that you’ve identified a problem in people’s lives and their jobs and that you’ve got a solution for it.
QUICK DIVES
1. Gmail Creator Paul Buchheit’s 90/10 Rule For Your Startup.
“Do what gets you 90% of the solution with 10% of the effort.”
There’s a direct correlation between how complete a solution needs to be before users will use it and how painful the problem it’s trying to solve is for them.
If you’re truly making something people want then they’ll be ok with an only half-baked solution.
First-time founders miss this. If people aren’t using their product, they think the reason is because the product isn’t good enough rather than the problem isn’t painful enough. This leads to founders spending months or even years on a product that is very unlikely to get off the ground.
The solution is to implement the 90/10 rule:
Find the most painful part of the problem for your users and focus all your time on solving that specific thing.
2. Amazon Decision-Making Framework
In 2015 Amazon was a big company and no longer a startup, but their framework for decision-making is arguably more relevant for startups.
Founders need to make quick decisions, even amidst a lot of uncertainty, so it’s important to not only recognize which decisions are reversible or not, but also to use an entirely different decision-making process for both respective types.
Reversible decisions → Emphasize speed. Make educated decisions but being fast is more important than being right.
Irreversible decisions → Emphasize correctness. Take your time and gather all the necessary information. It’s better to be precise than aggressive with these.
Jeff Bezos laid this out in his 2015 shareholder letter when talking about Amazon’s “invention machine” process:
3. "The Half-Truth of First-Mover Advantage” - Steve Jobs
Being first in the market is often seen as a competitive advantage, but how real is this competitive advantage? For example, do you have to be first – new product, new service, new market, etc?
Moving quickly and striving to establish your business as the ‘go-to’ product/solution in a new market (or niche) sounds like a competitive advantage, but the reality is often very different.
What History Taught Us
If you study any new industry or market, you will find that most pioneers didn’t build truly great products/services/companies, incumbents did!
For Example
Apple was relatively late to the smartphone market. Blackberry, Nokia, and Windows had at least five years of a head start on the first iPhone – released in 2007. Note: By 2009, the iPhone surpassed Blackberry sales.
White Castle had over a decade head start on most hamburger chains but failed to capitalize on it – leaving Ray Kroc and McDonalds to revolutionize the fast-food industry.
Chrysler, Ford, GM, Honda, Nissan, and Toyota all released an electric car in the early 1990s. Tesla didn’t release its first car (Roadster) until 2005. A decade after traditional automakers already had their electric cars on the road.
Facebook was not the first social media site, Six Degrees was in 1997. Facebook didn’t launch until 2004.
When Compaq released their “portable” PC (laptop), there were at least 15 other offerings at the time, but theirs was the first to run software built for IBM.
We can list examples of companies failing to take advantage of being first in the market. Some will argue that timing is the main reason why so many pioneers failed to dominate the market.
Timing Is Definitely An Important Factor, But It Is Not The Core Reason – Execution Is. More specifically, excellent product/service execution and great marketing execution.
Steve Jobs’s iPhone, for instance, didn’t become a huge success because it was the first smartphone, but because of excellent product execution (an industry-first 3.5-inch touch-sensitive screen) and extensive marketing to promote it.
On the marketing side, it started with a promise from Steve Jobs, “A device that will deliver all the features of iPods as well as the smartphone.” Creating a lot of excitement well before the first-generation iPhone was revealed to the masses.
The next logical step for Apple was to reach out to influencers (e.g., reporters, reviewers, experts, etc.) to critique the new iPhone. Unsurprisingly, most publications and reviews were favourable, describing the first iPhone as a “breakthrough” device.
So it was all down to a great device? No.
While it had a great design, the iPhone had many adaptation challenges that marketing had to overcome. For example, it had a substantial price tag of $499-$599. At that time, higher than most of its competitors.
Second, customers had to sign up for a two-year contract with AT&T (using a slower EDGE network and not 3G which was faster and available at the time).
While acknowledging these challenges, Apple’s marketing team focused on its unique selling proposition – an industry-first 3.5-inch touch-sensitive screen. As is the case with any significant product launch from Apple, marketing had a healthy budget for television, print, and web ads.
Lessons Learned
Of course, your business doesn’t have Apple’s resources, but that’s not the key takeaway.
The lesson to learn is that execution (product + marketing) is far more important than being the first to the market.
In many ways, your organization is better off entering the market second, third, or even fourth. Why? A road to new markets (innovative products/services) is paved with mistakes and lessons learned. Expensive lessons that your company can avoid if you pay attention.
For example, being first to the market means educating potential customers on the new product/service – a very time-consuming and expensive marketing exercise. Let the pioneers do that for you.
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THIS WEEK’S NEWS RECAP
Major News In VC, Startup Funding & Tech
Silicon Valley VCs invested nearly $35 billion in defence tech startups in 2023, with an additional $9 billion in 2024 so far. Firms are increasingly hiring ex-military personnel. More Here
Reliance Industries, India's most valuable company, is considering spinning off its telecom arm Jio for a public listing as early as 2025 at a $125 Billion Valuation. More Here
Index Ventures has raised $2.3 billion in new funds, with $800 million for venture investment and $1.5 billion for growth and late-stage companies. More Here
Humane, an AI hardware startup, has faced challenges post-launch of its Ai Pin, including layoffs and sale rumours. Two former Humane executives, Brooke Hartley Moy and Ken Kocienda, have left to fou.nd Infactory. More Here
Microsoft ditched the OpenAI board observer seat, citing improved governance. Apple reportedly won't take the expected observer role. More Here
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TWEET OF THIS WEEK
Best Tweet I Saw This Week
8 main qualities that Vinod Khosla looks for when conducting CEO searches for portfolio companies.
Interesting X’s thread by Vinod Khosla.. I found the 3rd point interesting -
Look for - The Technical Athlete, Not the “Expert”
“My bias is to find someone who hasn’t spent too much time in the industry to which the startup belongs. Some time is helpful, but too much leads to sclerosis. For example, when hiring for a medical device business, avoid candidates with too much time in medical devices. But the candidate should have experience working in complex engineering outside of medtech. The latter, coupled with deep technical expertise and just a small dose of medtech experience is likely to be more innovative and faster-moving.
There are very few areas where somebody innovated in an area where they’ve spent their life deeply entrenched. In the 40 years in which I’ve participated in disruptive innovation, I actually can’t think of one example. That’s an unusual kind of statement, and I’ve looked hard. Were space launches disrupted by Airbus, Lockheed and Boeing? No. It was SpaceX and Rocket Lab. All that activity is coming from people who weren't in the business.”
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Venture Capital Jobs & Internships
Venture Capital Internship - Jan 2025 - b2 venture | Germany - Apply Here
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Content Lead - Blume Venture | India - Apply Here
Executive Director, Global Climate Strategy - 500 Global | USA - Apply Here
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Analysts - Trifecta Capital | India - Apply Here
VC Intern - Gruhas Collective | India - Apply Here
Internship - Thrive Venture | Remote - Apply Here
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This guide covers various topics and provides valuable curated materials
1️⃣ Sourcing & Due Diligence
2️⃣ Product -Market Fit
3️⃣ KPIs and Unit Economics
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5️⃣ Valuation
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9️⃣ Platform
🔟 Additional HCP Resources
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Love the way you have detailed every step with great examples . I work in Sales and this is very very useful in what we do day in day out . Thanks for sharing !