2 Devs, Truckload of Coffee, and a BIG Dream — Bootstrapping Tensor
Single most inspiring story that founders can hear about in Crypto industry.
How two developers with an Idea and no VC fundings dethrone a company with 90% market share, a team of hundred, and $200 Million in VC Fundings — This is the story of 2 cofounders, Ilja and Richard Building Tensor.
Alliance DAO cofounders Imran and Qiao invited them to their podcast to share their story, lessons, and strategies building Tensor. This is going to be the most important read for you, if you’re a founder in early stage.
The overall insights are bundled into 13 different mental models (Key Ideas) with collective insights of Ilja, Richard, Imran, and Qiao that you can go back time and again for inspirations and learning in your early days of building.
Let’s dive in.
When asked, do you wanna Raise Funds Now?
They said, NO. We want to continue validating our product and figuring out who are our customers going to be.
There’s no point for us to raise money if we ourselves can’t build a product that people love. Hiring 2 Dev and 2 Biz Dev people is not going to help us find product market fit.
At the end of the day, we as a founder can only identify a product that people want to use.
“No matter how much money you raise, how many people you hire, none of that matters unless you find Product Market Fit.” — Richard Wu
Envision the end goal, Build backward from there
Envisioning the end goal and woking backwards to what needed right now and then building up from there has been the secret ingredient for Tensor.
Here’s how we did that:
Most people saw NFTs as a toy, we saw the beginning of new asset class.
If you extrapolate that thoughts further, you start to think about all the financial primitives that need to exist in future.
We started thinking of all the things that supposed to exist in future for NFTs.
And then we thought, in order to get there — First thing we need is two-sided order book, where you have both bids and asks and that was time when there were no collection with bids and asks.
So the initial inclination was to build a trading product where you have both and then added to that we started thinking about what if it was faster, analytical, more data, chart — all of this led us to this PRO NFT Trading Platform on Solana.
“To envision such thing, you have to be fully immersed into the industry, domain and community, their conversation to come up with good judgement.”
Focus on Product Market Fit > Raising Funds (Imran)
First validate the hypothesis of your product idea. Don’t raise fund and think, what we should be doing with the capital.
In the early days, your number one priority should be, how do we validate our Product Idea and get to Product Market Fit first before thinking about anything.
Don’t worry about:
Raising funds right away
Growing team
All the things everyone else’s doing
Focus On:
Who are your core users?
How are you going to serve them?
Are they going to give you the money or the validation to grow your team?
Mistakes most founders make in early days (Qiao)
They focus on raising funds right away without having product market fit first, they eventually end up raising millions of dollars seed round and spend all day thinking:
How to spend that money?
How to hire people?
Once they hire bunch of people, all day thinking about how to manage them?
How to solve interpersonal conflicts?
Eventually creating layers of hierarchy within the organization.
Instead of forcing on the only thing that matters which is “Product Market Fit”.
And they all of that pre product market fit which is an incredible waste of money, time, and effort.
It’s perfectly fine to raise a lot of money to scale after they find product market fit, before that it’s complete distraction.
What’s most important factor for PMF?
The simplest way to think about Product Market Fit is in terms of Team, Product, and the Market:
When a great team meets a lousy market — market wins
When a bit lousy team meets a great market — market wins
But, when a great team meets great market — Something special happens.
The gist is, ultimately Market wins.
If you have a team, a product, and a market — Market is the ultimately the biggest pull factor in validating your product.
Don’t listen to your investors, listen to the market and your customers to find Product-Market-Fit.
5 Key Questions for finding Product Market Fit (Imran)
In the early days, ask yourself these five questions to get closers to finding product market fit:
How do we launch our product?
Who should be our first customer?
How should we approach our first customer?
How do we get feedback from them?
How do we iterate over time?
Note: Read “Do Things That Don’t Scale” — by Paul Graham.
Idea + Opportunity (Market Size) == Victory
Let’s say, you came up with a great idea about something that’s much needed.
But, what’s equally important here is the size of the opportunity (Market Size) to decide whether it’s worth building or not.
You really need to not only think about, is this something that I feel is needed and not done yet, but also need to ask yourself: If this is successful — How big can it be?
Answer to this question is really important in the early days of the company.
Iterating & Pivoting — The most important skill
Iterating and pivoting s the large part of how startups actually find the product that they wanna build to assess a BIG MARKET.
Assess the product you built, if you realize that this isn’t the right market because it isn’t big enough and decide to move away from that.
Tensor, finding early customers
First things we did, found a list of really active NFT wallets on Solana. Figured out associated twitter accounts using a tool.
We messaged everyone the screenshots of our product and told them, this is what we are building, would you want to be in Beta?
After messaging many, 50 joined our telegram group and by listening to them over and over again, we built a good judgment about our idea.
What was interesting, even though we only had 50 users — one thing we looked at was:
How often these people coming back? Not just to show up, but use the product.
One thing that they mentioned that our platform was better for early mint because we had faster data on Tensor vs existing marketplaces, because we did that very well.
Retention rate was a good early indicator that we had something people wanted
We kept on building until we had more and more users before we considered actually building our own Liquidity and trying to tackle the two-sided dynamics of a Marketplace.
When you’re building product, don’t iterate in the sense that will take you away from your target customers, stay focus on the customer, just continue listen, get feedback, and understand what are the problems that you’re trying to solve. — Marc Andreessen
Identify Signal from the Noise
A lot of people were telling us, you should add this additional statistics because I see that in other platform, it will be useful for me to see it all on one screen.
The only thing that they can tell you is, what they know and that may not necessarily be things that help you build a successful product.
Listening to your customers works.
But it doesn’t work in a sense that it tells you what to build, it actually builds up your intuition — that’s what it does.
The more you listen to them, the better your idea becomes and it’s ultimately your idea that’s gonna make or break your company.
You also wanna know your target customer pretty well, some of those customers may not be your target customers, you accidentally serve group that’s weren’t your customers. — Qiao
Listen to their feedback to find the problems not to introduce a feature
You should never implement solutions that your users suggest.
You should always listen to their problems, and across a bunch of user feedback — try to dissect what are the most important problems your current users are facing.
Because the one thing that your users will never tell you is the thing you should be building.
But they will always tell you, one way or the other, these are the problems that they are facing. You have to figure out what those problems are.
It’s usually the things that doesn’t exist, they can’t really tell you what it is — you have to figure out on your own by listening to their problems.
You cannot ask them for solutions, you need to understand the problems.
Because they don’t know what they want or what’s the best solution for them but they know what their problem is.
Your job as a founder is to figure out their problems and then propose a solution to them not the other way around.
Listening to your customers problems and not their solution is the single most important thing you can do as a founder.
Tackling Cold Start Problem:
Our first product was aggregator, we knew there’s going to be cold start problem if we just build marketplace from the outset.
We had to essentially build the product where we can just get users in and they have something to do without solving that cold start problem in the beginning.
It would be impossible for us to do what we did and try to build marketplace from the very beginning.
But, If you don’t have a cold start problems, customer acquisition is the easiest thing
If you have couple of customers (2-5)
If you can make them really happy
And the retention is really high and your net promoter score is really high
That is far more important than the efforts that are going into customer acquisition itself.
Because if you make these 5 people really happy — they are gonna acquire customers for you.
Create a new category, Dominate it
Find an interesting segment in the market that other competitors overlooking and make sure you have a great idea for why that segment is actually going to be important.
Competition is for losers — Peter Thiel
One thing that is true, Competition is for Losers, you never want to be competing with somebody.
But the only way you do that is by basically opening the new market and entering those markets as the first player and winning them entirely.
When you’re building a product, think about what you could offer that’s highly differentiated that can serve a particular group of customers.
Similarly to like what Tensor did!
Magic Eden had 90% market share, there were other competitors. But the way they thought about building Tensor is like:
What if we put in data, make it easier, faster to use our product, may be there’s something, they went with that idea and ultimately established a beachhead that led to where they are now.
Instead of thinking about copying or doing what your competitors are doing.
Try to come up with a very different mindset that allows you to serve a particular user group.
Adapting to uncertainty
The landscape in crypto shifts so fast that you could be at product market fit today ad no product market fit tomorrow — we have to be very conscious about this.
We have to be very serious about :
How do we bring new users to Solana
How do we 10X the market size
How do we become leader in new category that’s emerging that are not yet present
“The only certainty is uncertainty.” — Pliny the Elder
Here’s the TLDR:
Prioritize Product-Market Fit Over Fundraising
Envision End Goal and Work Backward
Identify Early Customers and Validate
Iterate Based on Customer Feedback
Understand Market Size and Opportunity
Create Differentiated Offerings
Adapt to Uncertainty
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