Rapidly test and validate any startup idea with the 2-day Foundation Sprint

We would have a conversation with founders. You're saying, like, gosh, I'm almost embarrassed to ask this question, but who exactly is your target customer? And three co founders have three different answers.

After these hundreds of teams that we've worked with, we've seen that there's one failure mode which is they don't know what that set of basics are. Then there's this other failure mode where they never test it.

Let's talk about the Foundation Sprint. Walk us through the process. How does it start? What are the steps?

The very beginning of your project, we recommend this kind of, kind of crazy idea that you clear your calendar so the core team come together for 10 hours roughly and go through a sequence of activities so that we can make all of the key decisions together.

I think a lot of people wonder as they're hearing this is why don't I just build something and launch it and learn?

One phenomenon we've seen when teams are building things really quickly with AI is that the more AI generated or assisted they are, the more generic they tend to turn out. Put yourself in a situation where you can slow down and do some hard thinking, some deep thinking about what's actually going to make your product unique. Going fast can actually slow you down in the long run.

Today my guests are Jake Knapp and John Zyrotsky. The framework that Jake and John share in this conversation is basically the missing manual for founders and product teams trying to refine and test their startup or product idea. It's called the Foundation Sprint and it emerged out of the famous Design Sprint, which Jake and Jay Z co created, and also from working with over 300 teams, building both new products at startups, also with teams at larger companies like Google, Microsoft, YouTube, Slack, Uber and many more. They published a book with this framework at the beginning of this year called Click. And the excerpt from that book that dives into this framework is one of my most popular posts of all time and is one of the rare non AI posts amongst the top post rankings in this conversation. Make sure to get your pencils out because we go through exactly how to execute this two day Sprint where at the end of it you have a very clear hypothesis that your entire team is aligned around. That clarifies what you're building, who you're building for, how it differentiates from competitors, and how to quickly test it with real potential customers. The two days that you invest in a Sprint might be the highest ROI days in the history of your product. And I highly encourage you to do this if you're in the process of baking an idea. If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. Also, if you become an annual subscriber of my newsletter, you get a year free of a bunch of amazing products including Bolt, Linear, Superhuman, Notion, Perplexity, Granola and more. Check it out lenny'snewsletter.com and click bundle. With that I bring you Jake Knapp and John Zyrotsky. This episode is brought to you by Brex, the Financial stack used by one in every three US venture backed startups. Brex knows that nearly 40% of startups fail because they run out of cash. So they built a banking experience that focuses on helping founders get more from every dollar. It's a stark difference from traditional banking options that leave a startup's cash sitting idle while chipping away at it. With fees to help bouncers protect cash and extend Runway, Brex combined the best things about checking treasury and FDIC insurance in one powerhouse account. You can send and receive money worldwide at lightning speed. You can get 20x the standard FDIC protection through program banks and you can earn industry leading yield from your first dollar while still being able to access your funds anytime. To learn more, check out Brexit@brex.com banking solutions. That's B-E-X.com BankingSolutions Many of you are building AI products, which is why I'm very excited to chat with Brandon Fu, Founder and CEO of Paragon. Hey Brandon. Hey Lenny, thanks for having me. So integrations have become a big deal for AI products. Why is that? Integrations are mission critical for AI for two reasons. First, AI products need context from their customers business data such as Google Drive files, Slack Messages or CRM records. Second, for AI products to automate work on behalf of users, AI agents need to be able to take action across.

These different third party tools.

So where does Paragon fit into all this? Well, these integrations are a pain to build. And that's why Paragon provides an embedded platform that enables engineers to ship these product integrations in just days instead of months across every use case, from rag data ingestion to agentic actions. And I know from firsthand experience that maintenance is even harder than just building it for the first time. Exactly. We believe product teams should focus engineering.

Efforts on competitive advantages, not integrations.

That's why companies like U.com, aI21 and hundreds of others use Paragon to accelerate their integration strategy. If you want to avoid wasting months of engineering on integrations that your customers need. Just check out paragon@use paragon.com Lenny, Jake and Jay Z, thank you so much for being here and welcome to the podcast.

Hey Lenny, thanks for having us.

Yeah, thanks so much for having us on again. This is always a treat.

This is going to be a very tactical conversation. We're going to be going through how to actually execute a Foundation Sprint. And the reason that I'm excited to do this is you guys shared an excerpt from your book where you initially shared this whole concept. It's called Click. You shared this in my newsletter and I was just looking at it and that excerpt, that post is Amongst the top 10 most popular posts of all time in my newsletter, which is especially special because it's not an AI oriented. It's one of the few non AI posts that are near the top 10, which just tells me how valuable this is to people and consistently has sat there and hasn't been usurped. Just continues to climb. So I'm really excited to just have a conversation where we share actually how to do this. Let me just start with the beginning, just a little backstory on how the Foundation Sprint came to be. I know it emerged out of the now very famous Design Sprint, which you guys also developed. So just give us a very brief overview of just how this came to be, this idea of this Foundation Sprint.

Well, maybe I'll start by talking about the Design Sprint part because it is essential to understanding the Foundation Sprint and the Design Sprint first developed. I had been working at the beginning of my career at Microsoft for a few years, went to Google, this is like 2007, 2008, 2009 and was working on the Gmail team, was working on some projects that were just executing, well, delivering shipping. But I had this other project, this side project that had been going on for three years with a couple of colleagues, was going nowhere and it looked like their office was going to get shut down after the financial crisis. They were in Stockholm. I went there for a week, we cleared our calendars for the week and we created a prototype of this, this thing because we decided, look, we're, we're never going to get anywhere. We've tried making the perfect pitch, we've tried to, you know, make the ideal prd. We've tried to show the ideal design and we just, we can't. Perfection is not working. We're not able to align people. We're not able to get sort of executive support for this thing. We couldn't convince Larry and Sergey and Eric that they should fund this thing. And in that week in Stockholm, we created a prototype instead. We decided, you know what, forget it. We're just going to build something and put it in people's hands, put it in our fellow Googlers hands. And that prototype was what became Google Meet. It was this video conferencing tool that you could use in the web browser.

No big deal.

Yeah, it was really cool. I mean the outcome of that, that's definitely probably the most productive week I've ever had. But the thing that struck me at the time and in hindsight was wow, it was so different to clear the calendar for a week and have the entire focal point of every person on the team be how do we create a prototype that's so real, that works so well that people will think it's real, that they'll react like it's real, that they'll want it? And we were in survival mode. You know, we were trying to keep that office from getting shut down. But the, the notion that maybe you could repeat that and recreate that is what led me to create the design Sprint. So for a couple years at Google I started running these one week programs with teams trying to go at the beginning of a project from, you know, zero to a prototype at the end that we can, that we can sort of evaluate, test. And then I went to go work at Google Ventures. So separate, one of the Alphabet companies were investing in startups. I meet John Zaratsky and we start running these design sprints with, well, it turned out to be over the course of five years, I don't know, a couple hundred teams working in the early days with founders, the early days of their establishing the product for the first time, trying to build it from 0 to 1 or launching a new marketing campaign, a new ad campaign, some big high risk endeavor. We'd get to work alongside them for a week. And we ended up refining this process into a recipe. So across five days it's map, sketch, decide, prototype and test. One big focal point for each day. So at the end of the week you've got a tested prototype and you learn like, are we on the right track or not? And that's the design Sprint. That's kind of the, you know, the, the prologue, the, the backstory to this thing. And then after a few years at Google Ventures, John and I left and eventually together with our co founder Eli BLE Goldman, we started our own venture firm, Character Capital. And that's kind of where the story of the foundation Sprint comes in.

Okay, awesome. Jay Z, anything you wanted to add.

One of our goals, probably our biggest goal for starting our own VC firm was that we wanted to be able to focus on just the kinds of companies and the stage of company building, that was the most fun to us, but also was where we thought we could have the biggest impact. And so, you know, for us, with our background as, as designers, that is the early days, the first couple of months or the first year or two years of building a new business. And at gv, you know, sometimes we did that, but sometimes we were working with, with companies that were already well established. And when we'd come into those companies, they kind of knew what they were doing, they knew what they stood for, they knew how they were different in the market and how they were positioned and so we could help them, you know, answer these big questions and solve these problems and test their prototypes with customers. But when we started investing in, you know, truly pre seed, sometimes inception stage, you know, pre product, pre revenue, pre everything companies, there was this piece missing at the beginning of that process. So we, we'd run design sprints and they would be helpful, but oftentimes it felt like there was, there was a foundational element of that project that we didn't quite have our hands around. And it was things like, you know, what is the problem you're solving and who's the, who's the ideal customer? How are you different than what's in the market today? Who are your actual competitors? And there were these questions that just kept coming up again and again that led us to say, hey, we need to create a new Sprint method, something that is really targeted for the very beginning of these big new projects. And so that was what led us to create the Foundation Sprint at Character Capital in 2021. 2022.

Okay. Yeah. I was wondering the timeline on this, what I love about stuff like this, like episodes like this is you guys have done so much work and done this so many times with so many companies, so many founders and have learned what works and doesn't work. You said hundreds of founders, hundreds of startups. Yeah. And you've just spent so many hours studying this, refining it, crafting it, and now you're just here to share all the answers, Save us so much time. Just like the ROI on this is incredible for us. So I appreciate you guys doing this. Let's get into it. Let's talk about the Foundation Sprint. Walk us through the process. How does it start? What are the steps?

So specifically, what we talk about with the Foundation Sprint is it's at the very beginning of your project, we recommend this kind of crazy idea that you clear your schedule, you clear your calendar. So the core team, this is the co founders, if it's a startup, if it's a product team inside a larger organization, it's the, you know, it's the whoever's in charge of product, it's whoever's in charge of engineering, it's whoever's in charge of design, it's whoever's in charge of marketing, it's the core leadership team. They're going to come together for. It's going to be 10 hours roughly, give or take. And during those 10 hours, we're going to go through a sequence of activities, very highly scripted sequence of activities, so that we can make all of the key decisions together and identify the basics of the project, what's going to differentiate us in the marketplace and what's the best approach or implementation path. All of those together form a hypothesis. And then we recommend. So you finish now that's your foundation sprint. You've got your founding hypothesis. Once you've got that founding hypothesis, then you're going to go and do design sprints. And we recommend you clear the calendar for two to three weeks at least, so you have the chance to be wrong about your hypothesis. And we're going to run experiments. And again, the design sprint, highly scripted calendar, clear. You know, email's off, we're just. Slack is off. We're just focused on running through these sequence of decisions, building prototypes, getting them in front of customers, learning about a scorecard that relates back to the founding hypothesis. So at the big picture, it's, it's going to be anywhere from 10 hours to three to four weeks. You're going to run this detailed script of activities with your team with their calendars. Clear. And that's crazy and most people won't do it, but if you do it, it confers upon you a huge advantage because now you've got information, you know, whether or not your product clicks with customers. And that's a. We've seen that be just such a tremendous signal for is there going to be product market fit?

Okay, that was really helpful. The 10 hours is that specifically. That's the Foundation Sprint timebox.

That's the Foundation Sprint time box.

Yeah.

And it's, it's give or take, right? It might, you might go fast and be done in, in eight and you might have a lot of conversations and have a slightly larger team and might take you 12. So we like to spread it out over two days, do two, you know, like four to six hour blocks.

Okay. And then the three to four weeks. Ish. That's including the design sprint.

That's the design sprints? Yeah.

Okay.

One week.

Awesome sprint. Okay. This is incredible ROI on 10 hours of work. Basically over two days you get to have a much stronger sense of whether your idea is any good. And you can. Yeah. Is that a simple way to describe it? Like you just supercharge validating an idea?

Exactly. Yeah. It's, it's a, it's a chance to. In the, in the 10 hours, it's a chance to get clarity about the core of your strategy, which is something that teams will often go months without really nailing down. And the three to four weeks, that's a chance to run experiments and get confidence you're actually building the right thing.

Okay, let's talk about these two days. How do you lay it out? How do you approach it? What should someone do if they want to actually try this at home?

So there are three phases to the foundation sprint. First phase is the basics. Second phase is differentiation. And the third phase is the, the approach to the project. So again, all three of those are going to come together to create the founding hypothesis. So the first phase, the basics, as I mentioned, that's identifying who's your customer, what problem are you solving for the customer? What's the competition for solving that problem? How do they solve it today and what are the alternatives? How else do people solve this? What are the workarounds? Those are really almost embarrassingly simple things to answer. But when we do this with a team and everybody's answering, you know, sort of proposing their answer to each question, we see everybody's got a different perspective. And then when we lock in the decision maker on the team says, okay, it's going to be this one, it's going to be this one, it's going to be this one. Now we have clarity and confidence that that's the right way to go. So we'll move forward from the basics into differentiation and identify what are the things that can set us apart from those competitors. And we're going to use the advantages we have. We're going to use our, our insight, we're going to use our motivation, we're going to use our special capabilities. These are things again, people are aware of these things, they're in tune to it. But we want to get super, super specific. And we'll go into an example in a second and I think that'll make it more clear exactly what we mean. But going then from differentiation to saying what are all of the different implementation paths we could take here. Let's identify what those are, put a little detail behind them and then we have a structured path for people to take so they can weigh that decision. But move through really quickly. Commit to one. Have a backup plan in case you end up feeling like you need to pivot once you start sprinting on it. And all of that together is going to form this, this kind of mad libs sentence. If we solve this problem for this customer with this approach, we think they're going to choose it over the competitors because of Differentiator one and Differentiator two. And it's, it's almost silly how simple this thing is, but really powerful for founders to have that clarity about. Okay, here it all is in one sentence. Now let's go test and make sure this is true.

Amazing. Let's look at an example. That's a really good idea. I know you brought some examples. You're going to do some screen sharing, you're going to pull it up. If you're watching on YouTube, you'll be able to see it. Also if you're watching on Spotify, you can see the video. If you're an Apple, sorry, mold. But do your best to describe what we're going to be looking at.

Yeah, so we're going to talk about this company called Latchet first. This is the first company we'll talk about and Latch it is a startup who was in our last group of character labs and we can go into character labs later on. But essentially this is kind of an accelerator like program that we run a character capital where we invest in a, a group of companies at the same time and we run them through that process that we were just describing where we start with a foundation Sprint and then it's going to be a sequence of three design sprints after that so that they're, they're testing and refining that hypothesis. And so it's a great time for them. These are founders who have just started their companies. They're kind of, you know, that pre seed, very beginning, zero stage and the progress you can see in those three, three and a half, four weeks, it's phenomenal. So let's, let's talk about Latch It. So Latchet a couple co founders, Chris and James, who were, they had left Substack, they were engineers leading up the growth team at Substack and they wanted to build a product for artisans. So if you imagine like you're a jewelry maker, you're a painter, you're a woodworker, and, and you want to sell your products outside of your immediate, you know, community, the physical place where you are, physical location. Well, you can, you know, you can build a site on Shopify, but you still have to market it. If you do that, you got to figure out how to reach those folks. You can put your products on Etsy, but Etsy has become quite commoditized. So you're going to be up against everybody everywhere and it's going to be very hard for you to build an identity there. Like to build a sense of who I am, what I'm all about. And so what Chris and James thought was, you know, maybe we could use some of the techniques and methods we used at substack to help people find other, you know, other newsletter writers through their community, through recommendations they make and help out artisans in that way. Wouldn't that be cool? So they were kind of at that stage, they had a few different ideas about what form that might take, what that might look like when they joined character labs. And so that's kind of the, the backdrop to this little quick story I'll tell.

And there's one really important thing to emphasize about Chris and James that Jake mentioned briefly, but I think is worth repeating, which is that they're engineers, they are builders. Their instinct is to write code, it's to build software. And they actually told us that they were excited but nervous to come into character labs where we would be encouraging them not to write code right away, to take this time to clarify the differentiation, the structure of what they're building, and to validate that with customers before they went all in on building a particular approach. And I think you'll see in this example how while they were a little hesitant to do that up front, eventually they saw how much more valuable it was to work in this way versus just diving right into building something that's.

Actually really helpful context. And speaking of the substack recommendations feature was one of the most game changing features for me with my newsletter because it basically supercharged my growth. So I get why they'd be so excited about bringing this learning to other ideas into their own startup. So thank you guys for doing that. And yeah, I'm even more excited to see what they're building.

Well, let's take a look. So this board here that we're looking at, this is like their Miro board. So we've got like a big template and whether you're watching on YouTube or listening to this episode episode, we'll talk about at the end how you can get Access to this template, which will kind of guide you through the process. But what happens in this first step in the Foundation Sprint, in the basics, as you said before, is that we're going through a sequence of questions. Who's the most important customer? For example, is the first question, the very first question that a team needs to answer. And as we do that, just as an important side note, we're using this tactic that we call work alone together. And specifically the note and vote is this method where everyone's in silence. You know, in this case, both Chris and James. But if you have a team of seven, it's gonna be all seven people be working in silence, writing down their own answers to this question. Who's the most important customer? Or who are all the different kind of customers? We might consider writing down multiple answers. And then once we've got those answers, the team's gonna vote on those. And then one person who's designated as the decider, usually it's gonna be the CEO of the startup, but it could be, in some cases, maybe it's the chief product officer, however they decide to do it. But one person's going to say, okay, this is our decision for now and now we're going to move on. And by doing this and using silence and using structure and then having a designated decision making process, we can move through a lot of conversations very quickly and save some of that energy that it requires to make decisions for the decisions that matter most. In this case, what we're really worried about on day one of our Foundation Sprint is differentiation. So we don't want to spend too long on the basics anyway. We motor through customer problem, the capability, the insight, the motivation that the team has, those are all advantages. And who are the competition. And we get this sort of one page sheet, the basics, and it's going to have the answers to all those questions. Who's our customer? In this case? Artisans who want to sell online, but they sort of find tech and marketing to be hard. The problem is sales growth. You know, if we, if we jump down to the competition, their number one competitor is Shopify. But Etsy is another way people approach this, as we mentioned. But there's also, you know, in person sales and art fairs or other ways that people try to get at this problem. And realistically, if you're delivering a solution, you need to stand out from all of those. And then there's their advantages. We talked about, you know, this, this key one, they built substacks, network growth features, so they know how to do this thing. So now that we've established the basics, we're going to move on to differentiation.

Before you do that, actually, let me ask a question here, because I think people seeing this could think, oh, this is like, I know all this stuff. So obvious. Like, like, it's like, okay, I get it. I have an idea. I don't need to do this. Where do you find people? Most are often surprised by something that emerges out of. This is like one of these buckets. Often, wow. We. This is often not what you expected, or is it generally a lot of surprises? What do you, what do you experience there?

I think the moment where you immediately start to see value is when everyone on the team is writing down their answers to these questions and then people put their heads up and look at what everyone else has written and they realize, oh, that's not what I would. That's not what I said. Or, I didn't think of that one. Or, you know, gosh, the actual concrete reality of going through with the team and being very transparent and clear about how we're making decisions too, about each of these things. When that basics sheet comes together and you see the specifics, the specifics are surprising, but it's also familiar. We look at it and you say, yeah, that all looks right. But I'm surprised by the specifics. They're not what I would have written. If I had written it down, I might have gotten two of those things, two of the, you know, six items on there. And I think that's what's. That's what's most surprising. It's. And I think it's also kind of a sense of relief that, like, okay, well, that's very reassuring that we have, we have clarity about that and we've made it concrete.

These activities that we do during the basics are impactful for different reasons. I think that problem can be really interesting because when teams sit down and think about it, it is often less clear than they thought what the actual problem is. Like, wait, what problem do our customers really have that we're solving for them? I think competition can be sort of an aha moment when they start to think beyond just, oh, what are the other startups in this space like? If this is an important problem, your customer's probably already solving it somehow. It may be a workaround, it may be an alternative, it may not be a direct competitor, but if it's worth solving, they probably have some way of dealing with it today. And what is that? And when you zoom out and you look at that set of competitors, it can be a little scary, but it is also an important moment for teams. And then I think that advantage isn't necessarily immediately beneficial, but it becomes really valuable when the teams are looking at differentiation because, you know, startups can't compete with big companies on scale or on having built in distribution advantages or having partnerships in place. So they really have to dig deep and figure out what can we do that nobody else is capable of doing. And so by taking time to sit down and do this almost unnatural act of like, wait, why are we special? And you know, when we're able to encourage teams to really think about that, it sets them up really nicely for the next step, which is differentiation, ideally based on those advantages.

What I'm hearing is a lot of the value here is also just everyone has the answers in their head in some way, but just seeing what everyone else is thinking and then aligning on one is a lot of this value.

Yeah, it's like thinking deeply and quietly about it yourself and then seeing what everybody else comes up with when they are able to also think deeply and quietly about it. And then, you know, ideally, if they're working with us in character labs, having somebody who's a bit external to push them and say like, try harder, like dig deeper, like what really makes you special here? How are you really going to beat OpenAI? How are you really going to beat Google at this?

This whole idea of noting and voting and working in silence. Such a recurring theme on this podcast of not doing brainstorms in large groups. A lot of people, like, it feels like that's just dead in every way. I just had this naming expert on the podcast who names names. Some of the biggest companies in the World, Pentium PowerBook, Sonos, Vercel, and that's their approach is they, they used to do brainstorms. He's like, that doesn't work. And now they just have small teams sitting quietly in a room, working together on, on ideas and then thinking on their own. So that's such an interesting trend. Yeah. And I feel like Ido just like created this whole we need to brainstorm post its. And then everyone's like, that's not actually working. Let's stop doing that. The other thing that I feel as you're talking through this, like what I'm feeling this is there's for founders, there's not like a manual for starting a company. You always have. It feels like this dark art of like, I guess I gotta find product market fit on this idea. It feels like this is almost a manual of the, everything you need to do to just get the basics of. Is this even worth doing?

Yeah, and that's why we created it, because we were, we still are investing in founders who are, you know, they're, they're incredibly talented and they're smart and they have a background that is going to give them an advantage in building some particular product. But you're right, there's. There's no manual and we were just kind of solving our own problem. And, you know, we, we believe in this so much and we see the ROI as being so great that this is the first thing we do when we make an investment. You know, we invest in a company and then we run a foundation sprint with them right away. We run more foundation sprints with startups than we do design sprints at this point. And, you know, I don't think we can ever encapsulate every single thing that you need to know or that you need to do to start a company. But this is our, this is our best take at, like, what you should do in the early days to set yourself up for success and maximize the chances that you're going to reach product market fit.

Amazing. Okay, let's keep going. So we've done the basics. What comes next?

Yeah, so we've done the basics. And another important thing that we've accomplished while going through the sequence of activities in the basics is to boot up the right context into everyone's head so that we're ready for the main event of this first day, which is differentiation. And I still have very firmly in my mind, like I grew up with a Mac plus computer, and you'd put in, you know, the disk and the drive and you'd have to, you'd have to boot up the app that you wanted to run. That's kind of the way our brains work. Like, we have limited working memory and we've got to have the right stuff in there when we're going to make a big decision, when we're going to think hard about a certain problem or question, it's important to have the right context fresh at hand. So the basics is really the context for thinking about differentiation. And differentiation is the heart of what we're doing in the foundation sprint. Because it goes without saying, perhaps, but we like to say it. When you are making a new product, people want to ignore it. People want to not pay attention to it. And if they do have to pay attention to it, if it gets in their face, they. They want to not try it because we just are all bombarded by so many things, and that's never been more true than it is now. And so we have defenses up to save, to save calories in our brain. We just, we don't want to engage. It's crucial then that a product has a clear promise that it makes and that that promise is radically differentiated from the alternatives and that that promise is strong enough that you'll try it and then that the product delivers on that promise. And so when we talk about differentiation, we're saying, look, we want you to be really clear on your promise, not the promise you're making to investors about this technology and what's special about the technology or what's special about the market opportunity. But with the customer at the center, we've started the basics by talking about the customer and the problem they have and the way they see the world. And we want to talk about what you're going to offer to the customer and how it's going to separate from the alternatives. And so in the end of this next phase of the Foundation Sprint, we're going to have a two by two diagram that's going to look like a business school 101 diagram. And in fact, we often refer back to this Steve Jobs iPhone introduction slide where he talks about the iPhone and he makes a joke about it. This is a Business School 101 diagram. But it's really helpful to start developing your product with this clarity about this is the promise we'll make to customers at the end. And we're going to deliver on that promise because we can test and prove that in design sprints. So anyway, we start off, we talk about differentiators and we talk about classic differentiators. Fast to slow, smart to not so smart to borrow from the iPhone slide, easy to use to hard to use and so on. And we just start off and have the team, okay, let's just score those up against the competition. Put a sticky note on those continuums showing where you think the product could be. And usually you'll do this and maybe you'll start to see, well, there are a couple places where we can stand out on these classics. That's great. These classics are easily understandable by any, you know, any customer. We're all sort of familiar with these kinds of things. So, okay, that's great. Then we get into writing custom differentiators. So we're going to write a bunch of, you know, good things on one end, crummy opposite on the other end, and then we're going to score those. And so for the latch it story, we'll pick up with, with Chris and James here, you know, they've written well, we could be really, we could really differentiate on networked versus siloed. Our approach is networked. If you're using Shopify, you're siloed. Right. Or, or we, you know, maybe, maybe we can differentiate on painless business growth versus labor intensive business growth. So that might be the specific way we describe the promise of our product. So after evaluating a bunch of these, writing a bunch of these, voting on them quietly, you know, and then the decider is going to say, all right, I want to choose a couple of these and we're going to try them out. The teams are going to. If you're running a foundation sprint, you're going to try out a few differentiators. You're going to score against your competitors, you're going to create a scale and you're going to say, okay, let's be honest, let's be tough. Where do we really think we could stack up against the competitors on this differentiator? We've chosen in great detail, plotting each, each company or product one at a time. Okay. So, you know, you do that for one differentiator, you do it for another. You do it until you feel like we've got two that are really strong. And then you make that Business School 101 diagram. And so, you know, here's, here's this one for Lyric. They changed their name to Latchet. So I'm going to. I'll edit that real time.

I love this rebrand.

So, yeah, so Latch, it's up here in the top right corner. And we say, okay, look, this is a good differentiation chart because you've got this quadrant here, this quadrant here, this quadrant here. Right, You've got the. So you're in the top right.

And you gotta be in the top right. You always gotta be in the top right. Always have to be top right.

You always have to be in the top right. And if you see those other three quadrants, the top left, the bottom left, the bottom right, those form an L shape and we call that Loserville. So we want to have like a way of looking at the world that puts all of the competitors into Loserville. And then we want to say, like, okay, if you can deliver on that and if that promise is compelling to customers, so both those things have to be true. Can you deliver on it? And do customers care and believe that that matters to them? If both of those things are true, you have a really compelling promise. You have the possibility of a very successful product. So now we've identified that, and that becomes a core of our hypothesis. Is that differentiation true? So that's the differentiation step.

Before you move on to the next step. Is that where you're going next? Just so I could take a. Yeah, yeah. Okay. Follow a couple threads. This is so awesome. There's so many. There's just so much value here. Also, just the slide at the end here, folks are watching YouTube. This is like your deck slide, right. Where you show your. Your competitors and how you're. You're better than them all.

Yeah. And actually, I want to jump on that for a second because we've all seen two by two diagram, right. There's a ton of these. They're. They're all over the place. And if you're anything like me, I just ignored these. I just thought these were pretty much BS up until like, well, whenever we started putting these foundations three or four years ago. And I think the reason why usually these, these two by two diagrams feel like this is just consultant baloney. This is just like who you know, it's. It's because, you know, maybe one person makes this chart and they do it quickly because they need it to slide for the slide deck. And the audience they're considering, maybe it's investors. And so, you know, often these describe technology or they describe the market opportunity. They don't talk about customer's perspective. And the other thing is that they're not proven. There's no evidence behind the fact that are these true. So if they are, if they did happen to be about customer perspective, it's unlikely that the whole team would have weighed in on what those differentiators are. And it's very unlikely that we would have tested and proven that that matters and that we can deliver on it. And so if you do all of those things and you do it at the beginning of the project, we think this has the potential. We've seen it. It becomes this. Well, this guiding light. Here's the North Star. We need to deliver on this. This is what we have to create. And that helps you make decisions all the way through your product development cycle.

Just to point people to justification for why differentiation is so important, there's a couple episodes that I did that I'll point to in the show notes that just give you more context on why you need to differentiate. So I spoke of David Placic, who is this naming expert that we just had on the podcast. He. His whole thing is when he's coming up with a name for like Sonos or Vercel or Windsurf, it's different. It has to differentiate. And he talks about this in depth. So we'll point to that episode. If you're. And this is just like, if you're not convinced, why are we spending so much time in differentiation? Also April Dunford, who's like the, I don't know, the God of positioning she has. Differentiation is such a core part of her approach to positioning. And so there's just like so much evidence to tell you that you. Differentiation is a really important step and element of successful companies.

One of the things that I've noticed about these topics that these. The basics we talked about already, differentiation, this notion of you need a foundation for your project. It's a bit more under the radar for people. I think it's a bit harder for people to immediately see like, oh, we need this. We see the people who react the strongest to this and have the strongest like, immediate affinity to this idea actually being, you know, startup founders, people who are really sophisticated, like in this challenge, product managers who are at, you know, we were invited in to speak at OpenAI and Anthropic about this and we see the product people there being like, oh my God, this is, this is really powerful. This is the kind of stuff we need. I think for a lot of folks though, it can sound like this is just elementary, you know, differentiation. Of course we need to differentiate. The problem is that all this stuff gets backgrounded. It's. It's something we, we've thought about a bit. We assume we're on the same page. We assume we're going to deliver something, but then kind of business as usual happens. We build a product, we get kind of more interested in the technology and delivering that and we end up trying to sell it to customers. At the end, we end up putting a coat of paint on it with a marketing page or sales deck we haven't actually built from the beginning. The thing that we know is going to matter to people.

One of the most useful steps here that I haven't seen before is just a starting place for how to even start thinking about differentiation. Like everyone's always probably thinking price and speed. Maybe you guys have a really cool just starting list that you showed here. Anything more you can add here for helping people start to think about ways to differentiate beyond the obvious price and speed and I don't know, a couple more.

So I'm just going to jump into another startup here just so we can see what this sheet looks like with scores on it. So this is a startup called Mello. Anyway, the standard classic differentiators where we start, they are fast to slow, smart to not so smart, easy to use to hard to use, free to expensive, focused to one size fits all, simple to complicated and integrated to siloed. And so, you know, you could probably argue there's these others that should be included or some of those should be taken off. But what we like about this is that it's a small set, they're easy to understand. We know customers can understand these and they create a great starting place for your team to think about differentiation because you can quickly look at this list and start scoring where you think your product could be on these scales. And you know that if you can use one of these, people will understand it. But it also starts to make the team comfortable with this notion of differentiation. And again, we want to make differentiation something that all of the co founders or all of the core team can participate in. It's not just the job of the person writing the pitch deck, it's not just the job of the marketer or the salesperson, but we're getting everybody's perspective in on it. And this is a great warmup activity before we start to write our own customers differentiators.

Awesome. And then again, this is just inspiration for coming up with more ways to differentiate something that is a common question I think for founders is price as a differentiator. Is there any insight you guys have there, like how often do you land on price being a good differentiator with the startups you work with?

I think price is rarely the, the most important differentiator. Part of what's interesting about going through these classic differentiators, these standard ones first, and then jumping into the custom ones, is that the classic ones are sort of universal. But it is going to be hard to beat the competition on very many of these. Like it's going to be hard to build a product that's faster than what Google can build or what OpenAI can build. It's going to be harder to be cheaper than those competitors because they just have so many more resources. They can have loss leader products that are, that are underpriced. Where I think pricing has become a really clear advantage for some companies is those that are leveraging AI to solve problems that were previously unsolvable with software. So we have a company that we invested in called Bindwell and they use AI to design precision pesticides and we ran a foundation sprint with them right after investing. And you know, five years ago you couldn't design pesticides with AI, right? It wasn't, it wasn't possible. Right. If you, even if you had that idea, you wouldn't have been able to build it. And now you can. And so for them, one of the big advantages is like, yeah, these pesticides, they can be, they can be a lot cheaper because it doesn't require this like massive team of, you know, R and D chemists to tinker and experiment with things in the lab to try to create new pesticides. We can design them with AI. So it is, it is more often true in AI companies like that. But it's very difficult to compete on price in general. And we think we find that it is not as, it's not as durable of an advantage as some of these other things.

That is such a good point because historically price has been a. Don't, don't compete on price for exactly what you said. It's not, it's hard to do long term. It's kind of race to the bottom. Especially if there's incumbents, they can price a lot lower. But with AI that is a really often and strong differentiator, like now do this thing like, like cursor, you basically is competing on. Yeah. You know, you're saving engineering time and you know, it's worth so much money to you.

Yeah.

I think at the same time like the output of the AI is probably not going to be quite as good as a human process. So it can be a little bit cheaper. Yeah, for now. But it has to be a lot cheaper.

It has to be.

You know, I've heard people offer 10x cheaper than the legacy sort of manual approach to solving that problem as a rule of thumb.

That's awesome. Okay, I'll just quickly reference. There's an episode that will come out before this with Modavon about pricing strategy and there's a lot of discussion actually on this.

Oh great.

Especially with how to design your price with customers as you're starting a company. Also the episode with the founder of Superhuman, Rahul, he actually spent. There's a lot of cool context on how he differentiated Superhuman. And it was actually very much on speed. And is speed actually. Yeah, speed was where he landed. And to your point, it was both. It was the Venn diagram of what you said. Can we do this and do people value it? And that's where his research pointed to is people really value this and they were able to achieve it.

One of the things that's really interesting about this example here that we're looking at, Melo, is that you can see that they were not the best on all these scales. You know, it's. And if teams are going through and they're being really realistic about how they stack up against the competition, it's normal and natural to find that you're not going to be the best on all these differentiators. And that is really helpful for creating clarity in your positioning and in your marketing, because you're not going to show a feature checklist chart that you know says you're better at everything than every competitor. But if you can drive home one or two things that your customers really care about and that you can be radically better at, it's going to improve your chances of winning and finding product market fit. And we find that going through this process where you're not just thinking about one differentiator at a time, or you're not trying to win on all of them, but you're looking across the scale of options and you're being just really honest about where you stack up, can both point you in the right direction in terms of what you will win on, but also can give you the comfort to say, hey, it's okay if we're not better than every single company on every single one of these things.

That's great context. That's gonna make people feel a lot better, I think. Today's episode is brought to you by Coda. I personally use Coda every single day to manage my podcast and also to manage my community. It's where I put the questions that I plan to ask every guest that's coming on the podcast. It's where I put my community resources. It's how I manage my workflows. Here's how Coda can help you. Imagine starting a project at work and your vision is clear. You know exactly who's doing what and where to find the data that you need to do your part. In fact, you don't have to waste time searching for anything because everything your team needs, from project trackers and OKRs to documents and spreadsheets, lives in one tab. All in Coda. With coda's collaborative all in one workspace, you get the flexibility of docs, the structure of spreadsheets, the power of applications, and the intelligence of AI all in one easy to organize tab. Like I mentioned earlier, I use CODA every single day, and more than 50,000 teams trust CODA to keep them more aligned and focused. If you're a startup team looking to increase alignment and agility, Coda can help you move from planning to execution in record time. To try it for yourself, go to Coda IO Lenny today and get six months free of the team plan for startups. That's Coda IO Lenny to get started for free and get six months of the team plan. Coda IO Lenny Anything else on differentiation? Before we move on to the third step of designing your approach, I think.

It'S worth taking a look at what it looks like when you have a bunch of sort of these custom crafted differentiators, what that might look like. Because in the case of Melo, we've got, I don't know, there must be 25 here. And you know, so they've written, purposeful, magical, clear, personal, provides direction, flexible, human, creative, beautiful, all come and on and on. What they're trying to get at and what we want every team to sort of think about here is what is a new version of reality, a new lens that you can offer to your customers on the world. Because a lot of times you're building a new product, you actually have to change the way people think about what's possible and what matters to them. Those classics are often already well trodden ground where other people have differentiated, they've already thought about it. But these new particular things that you know are possible with your technology, that you know is possible with the customer problem, the things that you believe might matter. It's really interesting to try some very fine tuned list of slight, sometimes just a slight variation, we slightly change this wording or the way we describe what's great about what we do and that is the thing we think is really going to stand out. And again, you can see even on this list that they've custom written, when we see where they score it, they're not all the way to the good end of the scale on all of them. You know, when they get honest and look through, they're like, well actually, you know, maybe we can't deliver on this, but this one we really can. And this one we also suspect will matter to customers.

Where did Melo land on the differentiators they picked and where did Latchet land?

Yeah, let's take a look for Mello, they tried out a bunch before they decided here. So they actually scored with the competitors on these scales.

And just for context, Melo is a tool that allows you to run very simple, very targeted, very useful AI agents for common everyday tasks like summarizing your email or cleaning up your calendar, or drafting responses to messages. And one of their insights was that there's been so many AI products that have over promised about being able to replace all humans and do anything and, you know, 10x your productivity. But so few of them have actually delivered on those promises. And so they have this insight that if they can be really focused and really human and really high quality and they can deliver on that promise of, you know, making your life better by offloading tedious tasks, that that's going to really click with with customers.

That's a great context. Thank you for adding that.

So Mellow lands on mobile first and works out of the box. If there are two differentiators and they're trying to differentiate from Gumloop and OpenAI a sort of a generalized tool and latch it, they're going to differentiate on.

Now we were pulling it up. If folks aren't watching, he's pulling up the mirror board to show us where they landed.

Latch it they're going to differentiate on helps you grow and cooperative. So when they compare against Etsy, when they compare against Shopify or setting up your table at an art fair, they're going to differentiate on helps you grow and cooperative and they think none of the competitors does both of those things.

Well, that is cool. Thank you for sharing that. And to your point, this is where they think it will work. And then the next step is actually test this in the market, which is where we go from here. So let's move on to the next step and which is the final step of the foundation Sprint.

Yeah. So closing off differentiation is a short step that is just to create some project principles that'll help you make decisions in line with that differentiation. And you know, you were just talking about superhuman and differentiating on speed. And when John and I worked at Google back in the 2000s, there was this list called 10 Things We've Found to Be True. And one of the things on that list was fast is better than slow. And what was interesting is this is a mantra that you would actually hear people using in meetings to help dictate decisions. Well, we're considering this approach to this view or this approach. This approach renders 12 milliseconds faster. That's probably going to be the one we're going to take. There's going to be a really compelling reason for us to not go with just the one that renders faster or the one that gets the user to their benefit with one less click. And this notion that you can have a decision making guide, we think we've seen it be so useful for us in those contexts. We think, hey, this is an easy moment. You've got your differentiators kind of loaded up in your mind. Let's take a second here and just think, what's a principle? How can we turn that into a principle? So if we take a look at Latch it, you know, they've got help, sellers help each other. So if they're trying to make a decision between two approaches, well, which one of these helps sellers help each other or do the thing that makes sellers more money? If we're choosing between two things, let's do the one that helps make them more money. And so we, we then have, we've kind of moved on. We've got a mini manifesto, we call it, which is that differentiation chart and these principles. And the notion is this page, the basics page, was just kind of the core simple stuff you need to know about this project. The mini manifesto in one page is your decision making guide.

This is so cool. And this looks like it would take a lot of work, but again, this is just a day or two of sitting around working through this framework.

Yeah. You'll get to this in 4ish hours with your.

Okay. By the end of the first day you'll have a mini manifesto that describes how you win essentially as a company and a startup.

Yeah. Or how you believe it's going to work. And of course we're going to test it.

Yeah.

Now the next phase of the foundation, Sprint is locking in on the approach we're going to start with. So we'll continue the story of Latchet here. It's easier to use an example than to describe this in the abstract. So coming into Character Labs, Latchet had sort of four approaches in mind, but they weren't sure which one to take. So they might build an app. That's one approach they could take. They might build a sort of a newsletter platform. That's something obviously they knew how to do. They might build a Shopify plugin. That's a simple way to kind of piggyback on something people are already doing. They're right, their number one competitor, Shopify, or they might have to build the full stack. And I think a big question for them was which of these and how much do we have to build before there's enough value for customers that they're actually going to adopt it and we're actually going to get some traction and get this thing going.

And it's important to call out here that all four of these approaches solve the same problem for the same customer. And they are all likely to differentiate from the competition in the same ways based on the unique advantages that the founders, Chris and James, bring to this company. So these are not like wildly different product ideas or company ideas. These are just different approaches. You have the same destination in mind, but you say, hey, which path could we take? It's like pulling up directions on Google Maps. This one's a little faster. This one uses less fuel. This one avoids tolls. What's the right approach for us to take?

And I love that the work you did on that first day eliminates a lot of ideas you probably had that you would have probably spent time building and then realizing, okay, this doesn't make any sense. It's just like what everyone else has.

Totally. Totally.

Yeah.

And we usually see teams starting projects in one of two states, and one state is the state that Latchet finds themselves in, where, gosh, there's a few different ways we could do this. How do we decide? We can discuss and discuss and discuss, but you know, that could go on forever. So that's state one. We know there are some options. And state two is we're pretty locked in on one approach already. We think we've got this figured out. In either of those cases, we think it's worth taking again, like about four hours, ish. To be really careful to lay out the options. If you think there's only one option, to sort of force yourself to think, well, what if this doesn't work? What's another alternative? Or is there another alternative that we have previously considered and dismissed that we should maybe reconsider just to make sure and end with a situation where you've made a decision clearly about, okay, we've considered alternatives. This is our first choice. And you've also identified this is our backup plan so that failure doesn't seem quite so scary when we start to run experiments and we're really able to pivot fast, should that happen. So what we're going to do on the second day of the foundation, Sprint, or this sort of third phase, which is the approach is to identify those different paths. So for latch it here, they've got A, B, C and D options. We're going to color code those and then we're going to plot them on these charts. So we've got these different lenses. We call this activity magic lenses. And the notion is, if we had a discussion about it and we could, as investors, if we could imagine, like waving a magic wand and putting the perfect team of advisors in place to counsel the founders on this decision. We would love for them to have a customer expert, somebody who's just, you know, brilliant vision for the product and the customer experience, and they're, you know, hammering Their fist on the table saying the customer, the customer, the customer. Make the decision that's best for the customer. And so we'll plot those options on these axes of easy to use versus hard to use and perfect solution to the customer problem versus, you know, this is just an okay solution to the customer problem. And then similarly, we want some, an advisor who's going to pound their fist on the table for building something cheap and fast. Getting it out into the market, being pragmatic, get it out there as fast as possible. That's the pragmatic lens. We want somebody who's going to advocate for growth. What's the way to reach the most customers? Get it in people's hands as fast as possible, easy to adopt. We want somebody who's going to advocate for money, for the financial health of the business. So what's going to create long term value for the customers? Where's there the biggest audience of these folks? We want to look at differentiation, which we spent the first half of the foundation sprint establishing. Well, we want to consider these approaches through that lens as well. And so what the teams will do is to plot these options on these lenses. They'll almost always create some lenses of their own, some custom lenses that matter to them. They might have one about their conviction. I think there's sort of a humorous one for Mello where it's like, which founder is like f. Yeah, that's exactly what I want to build. And on the other end of the spectrum, it's like, nah, just kind of the sort of heat of excitement that you feel. That might be a really important decision.

That feels really important. Like that feels like that should be one of your. You call these the magic lenses.

Yeah, it probably should be. It probably should be.

Just like, how excited are you to build this? It feels like a really important piece.

Yeah, we saw that one in. This is our cohort of labs that's going on right now. And I'll bring that one, that one up for, for context, if we add.

It, we can call it the Lenny lens.

The Lenny lens, yeah. Oh, that's a good idea. Yeah. So, yeah, so here it is. And you can see that Marie is more likely to swear than, than Ben apparently, but that it's. It's crucial. Right. And many founders, they'll have different. One of the challenges is that for each founder, I think each set of founders, there's maybe a different way that they phrase what that means, what conviction means to them. And sometimes, and maybe it's as simple as this, it's just I just feel it, I just know. And sometimes it's a little bit more like. Well, I, you know, it's, it's a, it's conviction, but it's also what's the data that we have behind it. And that's what forms my, my intuition about it. Awesome.

I love that lens. I love that you're asterisk out so it's not a little bit.

Just slightly concealed.

Slightly.

That's the part, yeah. If you zoom in, it's, it's actually not censored. So the cool thing about this lenses thing is at the end, you've done all that, you've plotted it all out, and if you're having a conversation like that, you just have to sort of maintain in memory, what did that person say? What did that other person say? What's that conversation I had, you know, a week ago? Whatever. Here it's all laid out and sometimes you zoom out and it's honestly as simple as, like, oh, hey, look, you know, the blue one is in the top right quadrant of almost every single lens. Like, what? What is that one? What's going on? That might just be an easy decision. Sometimes you zoom out and you say, oh, clearly, like, nothing wins in every lens. And that's actually really reassuring because then, you know, there is no perfect decision. There's nothing that checks all the boxes. And that's going to help us decide because now we decide which is the most important lens, which is the most important viewpoint to take. And you can, you can actually move forward in either. Either way, either situation you get in where there's sort of consistency across all the lenses or there's not. You either pick a lens or you just pick the consensus winner.

I love that this step answers a question that's been in the back of my mind that I think a lot of people wonder as they're hearing this is just, why don't I just build something and launch it and learn and like, what am I spending all this time sitting in a room? And this is. And this to me is a big part of the answers. Just like spending an hour or two thinking through, here's the ideas we have. How do they compare on the. How do they look on these magical lenses, which makes so much sense? Like, how do they just filter on what customers will love most, will help us grow the fastest, will drive the most money, Things like that, like, it's such a simple, quick exercise that will save you so much time building and launching and having to spend time learning. Like that is weeks, days, months, of work versus a couple hours could save you so much of that time.

And it's also the case that you start building something, it's exciting, you can move fast, it's easy to easier and easier to see progress now with AI tools. And that act of building and starting to create something has a momentum of its own that can be hard to stop. And if you're headed in the wrong direction, you can spend a lot of time building and making progress. But it's just, if it's not progress in the right direction, it's actually hurting you. And that's why we want people to pause and take this. It's really, as you said earlier, the ROI is high, but it feels very unnatural to pause when you're so excited at the beginning and ready to go, to pause and say, okay, let's make sure we're taking the right path. But you know, you just imagine you're, you know, you're Gandalf, you're Frodo, you're starting off, you're trying to get to Mordor, it's a long trip. You don't want to take the wrong path. You want to take the, you know, think before you start marching through, you know, the swamps or whatever.

One phenomenon we've seen when teams are building things really quickly with AI is that the more AI generated or assisted they are, the more generic they tend to turn out. Which makes sense if you think about how LLMs were developed. You know, they're all basically pre trained on the same data. And so in this excitement, in this rush to say, wow, look at how fast we can build it, you actually end up with something that is less differentiated than what already exists in the world. And then, you know, let's say you launch it, and that, you know, takes longer than building sort of a clickable prototype. But you launch it because you're moving so fast. And then you get data from the people who managed to find that thing about what they did with it, but you don't get any data about what they didn't do with it. And you certainly don't get any data about the people who never found it, who never, you know, tried it. Maybe they landed on your website and they're like, blah, another, like another generic AI generated thing, like, that's not worth my time. And so we think it's really helpful to basically put yourself in a situation where you can slow down a little bit and do some, like, some, some hard thinking, some deep thinking about what's actually going to make your product unique and Then you can switch into this mode of like, okay, great, now let's go as fast as possible and get that out into customers hands. But if you don't take this step first, it's actually kind of counterintuitive that going fast can actually slow you down in the long run.

Yeah. To build on that, I had this guest recently, Bob Baxley. Yeah.

Okay.

So he has this really interesting insight. He calls, he calls it, I think he calls it the primal mark. Essentially his feedback is wait as long as possible to start any sort of sketch or prototype because as soon as you start drawing what you're building it now, everything you do will be a response to that. And so the more time you can spend before starting to concept out the solution, the more likely you are to land on something that works.

Yeah, that is super interesting. And you know, it's, it is counterintuitive. Yeah. And I find myself challenged to think about it in the context of the sprints that we run with founders. But I think one way to interpret that in, in the work that we do is that we used to just run design sprints with, with every team. Like that was our hammer and, and you know, everything looked like a nail. And part of what we found so valuable about doing the foundation sprint is that it, it keeps you away from ideation for just a little bit longer and it, it forces you to think about, you know, why you're unique and, and the market that you're going into before you get to that moment of creating something that looks realistic and then maybe being a little bit locked into to that approach.

That's such a, like, I love that, that this emerged out of that. Like, you guys are so design Sprint oriented and it's just like, cool, let's just make prototype, let's design, let's make it real, let's show people. And that's like, I think where a lot of people's minds are at more and more or, and maybe as a result, and this is almost like, okay, maybe that wasn't the right approach to start. Maybe it's actually better to think a little bit of what we want to design and build before. And so just the fact that you guys spent so much of your life and time on that and then realize this is actually potentially even more important to do it says a lot.

Well, and I, ideas always get distilled down to like one thing that people grab onto and they focus on. And I think with the design Sprint, it got distilled down to just build a prototype, like just quit Messing around and build something. But you know, the reality is when you run a design sprint, it's five days and you don't build the prototype until the fourth day. Right. So you do a bunch of work to figure out, you know, what is, how does our customer learn about this thing, what are the different ideas that we're bringing to what our solution could look like, which of those are the most likely to work. And only then at the end of the week are you building a prototype. But I do think that as that method has become really widely known, people just think about the let's build something and then once you multiply that times the power of AI, it definitely creates this narrative that the, the only way to build something new is to just create the product as quickly as possible. And that that doesn't really match our experience. You know, that doesn't really kind of fit the pattern of what we've seen working best across the few hundred companies that we've worked with.

I think this validates in some ways the role of a product manager, where the PM's job is to help the team figure out what should we be building and are we all aligned on what we're building before we start designing and building. And so this is almost like, like this process is almost like the product requirements document of a, of a company, which I think a lot of product people listening to this will feel really good about.

Yeah, we see this as a great tool for product people. It's a way to give you a structure for leading your team through those decisions and a way to give the all the folks on the team, including the person who's the product leader, but the person who's the engineering leader, the person who's the marketing leader, the sales leader, the design leaders, the exact right opportunity to contribute and participate in forming the strategy. The exact right opportunity. As we get into design sprints, following the foundation sprints to then make it real and turn that, that idea, that hypothesis about what might work into hopefully evidence that it does work.

I feel like it's actually more helpful than to engineers like non product people because I think a pm, my brain would be like, I want to do this intuitively whether they do it right or not. I think it's other functions almost that are like, no, just jump straight to design, straight to prototyping. Let me ask you like Walt, we're on this tangent, we're on this wild tangent out of this process. But I want to this question has been in my mind because I recently had a founder on the Podcast mayor who built this company called Base44. He built it, it sold in six months for $80 million, two weeks. And the journey of that is he just had a problem he wanted to solve for himself or his girlfriend for a scouts program. He built it, people started using it, and he kind of evolved it from there. And obviously he didn't go through a process like this. Thoughts on Just like, is it okay to just do that? When should someone think about, okay, I should actually set aside time to do a foundation sprint versus like, I'm just motivated to solve a problem for my friends. I'm just going to build it, evolve it, iterate with them, kind of go from there.

One of the observations from our hundreds of experiences working alongside founders in the early days of their projects and watching them make decisions and watching them try things and succeed or fail is that there are so many founders who are incredibly bright, incredibly capable, they have great insights about the market, about an opportunity, and yet their startup does not work out. And there's a problem with selection bias that we hear from the folks who, they were brilliant. They were, you know, they checked all those boxes I just described. They saw a great opportunity, they were smart, they executed well, they had courage and conviction, and they did it and it worked out and it was a tremendous success. And I think the danger in thinking like, well, they didn't follow a process, so I don't need to. And, you know, that may be true. And, you know, that's that maybe, maybe you don't need it. But what we believe is you have a better. This just increases your odds. This is a chance to get more clear on. Is this a good opportunity to get more clear on Will the thing I build click with customers and if you've already figured out that my product has taken off, my product is working. We've actually had founders in labs who, they started off Character Labs and they said, I started selling this thing and it's already taking off. I want to stop running experiments. And we're like, yeah, stop running experiments. You don't need to do this. If you've got product market fit, if you've got evidence that this thing is clicking and you're. You have conviction, run with it. But if you're not there, this is a great path to get you going. And if you're not sure if the thing you're going to build is going to turn into that, you know, $80 million exit in, you know, in six months, we believe this is a good chance to improve your odds.

People hearing this Might be feel like I haven't heard of any company doing this that has become a trillion dollar IPO success. What, what would make me believe that this is a. The process I should follow versus just, I'm just going to do what I hear on yc, just build it, launch it, iterate, that kind of thing. What can you share to get people confidence? This is the approach to take.

Well, the first thing I'd say is give us some time. We're pretty new to this. We started Character Labs about three years ago. We created the foundation Sprint about three years ago. But more seriously, when we were creating this method, one of the things that we did was look back across all the projects we've been involved in and the ones that were really successful, and we looked for patterns. And while those teams didn't have the foundation sprint, they ended up having really clear differentiation and a really clear view of what made them unique that they were able to build on. And as we ran design sprints with them, we were able to sort of test and validate against that differentiation. So we believe that this is sort of a key to success even if those teams didn't have access to this exact same methodology.

So what I'm hearing is this is essentially like alpha in starting a company. This is a new process that companies are just starting to use. You guys are working closely with founders and it's rooted in the success of many, many, many companies that you guys were involved in early on and continue to be involved in.

Yeah, it's based off of this thing we've seen again and again in the most successful projects when we're inside the room in the early days and we're seeing people make decisions, this is what drives those decisions. It's differentiation. And so if we look back across, you know, all of the Sprints that we've been a part of over the years, and John and I have been inside lots of these rooms, lots of these conversations.

And if you're not watching on YouTube, by the way, there's a cool visual that Jake is showing.

Yeah, this spans across Google, Google Ventures, Character Capital, and if you're watching on YouTube, you'll see all these little white circles and each one sort of represents a company that we've seen inside of during these design sprints. And there are a lot of really great success stories in there. We've had the chance to, I mentioned the story of Google Meet and being there and figuring out what is it that's going to make those things stand out. That was what made the project finally start to take off. And to this day is still sort of what animates it. Being inside of, you know, the early days of what became Google Photos or Google Trips and some of the early design sprints and there's, there are a lot of others on here. But honestly, of course, we've also seen inside a lot that that didn't work out. If we looked inside the greatest hits, though, the real smash successes, we looked inside all of those, we realized there is a common element. And that common element in all of them is differentiation, that there was clarity around. This is what we're trying to prove to customers. This is the promise we're making. And so we've been on those teams or we've worked alongside those founders who have this clear idea of differentiation. And sometimes they're not right. They run the experiments and they change it. But the thing is, they're keyed into differentiation as being crucial. They're not just thinking about the product and trying to get the right shape of the product or trying to make it usable or whatever. They're really keyed in on differentiation and how do we find the right promise and deliver on that promise and express that promise to customers? So to explain a little bit quickly of what I mean by differentiation and how this is manifested in products, we've seen, if you go back to the early days of gmail in the 2000s, you know, if you had email, you were probably using Hotmail or Yahoo, and it worked fine and you didn't have to think about it. And this new product comes along and you're like, God, I'm not going to want to switch my email address. What a hassle. Who wants to do that? No one. Gmail's promise was, hey, massive storage, great search. And as we were building the product out and, you know, marketing, explaining it to people and making decisions inside the project, we had to continue to deliver on. Great search, great search, great search. That was. That was key to standing out. Fast forward to 2014, and we're working with this tiny company who's now competing with Gmail, who's now like sort of the market leader. People are used to using in, you know, in their teams. And here's this new messaging software called Slack, and they're, you know, trying to reach new customers. And gosh, switching to Slack isn't even bigger hassle than switching to your email address because everybody on the team has to switch. Well, Slack says, hey, if you believe that having fun and boosting teamwork is important, it's going to be Clear to you, this is a new way of looking at the world. And when they were making their decisions in their first big ad campaign, their first big marketing campaign, this was what they were trying to convey to customers. So we kind of, kind of see that from the inside. Another one, we didn't see this one from the inside, but one that we're all sort of familiar with is what happened with, with ChatGPT. You know, it goes from this trusted. I don't have to think about it. I'm going to run a Google search to. Oh, wow. It's a new way of looking at the world. There's zero clicks. Just tells you the answer. This thing's great. This is also something that we've seen in some of the early success stories from our own portfolio. So 2019, this company called Reclaim, going after calendar management. And, you know, most of us manage our own calendars. Most of us don't have administrators helping us out with that. And, you know, it's free. We're in control. Reclaim's argument was, hey, we can automatically, we can use AI to help you focus and to automatically prioritize your calendar. And that animated enough people to take the plunge and switch and try it out that they were able to build up an audience of, you know, tens of thousands of users. And Dropbox acquired them last year.

A great answer to my question, you guys well prepared for.

For the skeptics, part of our motivation, our selfish motivation with this foundation, Sprint, is that, you know, now that we are investing our own money into companies and we're working with all these founders, we want them to have that same clarity on differentiation. You know, we saw how important that was to Gmail and to Slack and to all these other companies, and we want to bring that. We want to sort of give them that same advantage and help them avoid the, you know, the pitfalls that all the other unsuccessful teams and companies that we've seen have fallen into. So that's. That's kind of what we're trying to do here, is bring the lessons from these really successful teams into, you know, any team that reads the book and.

Runs this process and the special sauce that John and I bring is that we're obsessed with the. The sequence of decisions that you make and how you work together with your team to make good decisions quickly. And that specificity about the method is something that we do have a lot of evidence behind it working well because of what's happened with the design Sprint and with how many successful teams have run that at those companies who are trillion dollar or whatever kind of giant. All kinds of teams run design sprints. This is that same methodology around how we work together at high velocity and high quality. And it's just brought to a different part of the process.

Excellent answer. Speaking of the method, we went on the world's most epic tangent. I want to bring us back. We haven't finished actually going through the process. I think we're towards the tail end of it, so let's just finish that. What else do you do? So you have this. Yeah, I guess.

Yeah.

Let's catch us up.

Let's catch up with Latch It. So as a refresher for you who forgot Latch it are building this tool for artisans. They want to help them sell with the community networking features like you might find on Substack. And they've identified their differentiation, they've identified their approach now using magic lenses. And all of this is going to come together to create a founding hypothesis. So if we help artisans solve online sales growth with a social sales app and then they've also got their backup plan, or we could build the full stack solution. If that doesn't work, we believe they're going to choose it over Shopify and Etsy because our solution is cooperative and easy to use. And in this single sentence, we've laid bare their strategy and now they're going to try to find out does that work?

That is so cool. So the output of the sprint is the founding hypothesis. And I love that the term hypothesis is a part of this because it's not telling you this will work.

It's.

This is the thing you will now test.

Absolutely. And every project has at its core, every new product has at its core a hypothesis. There is a founding hypothesis. It's just usually not explicit. It's usually hidden. And different people on the team may have different ideas about what it is. And because it's not explicit, it's very hard to interrogate it and test it and find out if the different variables in it are the right variables.

I'm curious what's in that photo to the right as you're showing the YouTube.

Oh, yeah. If. If you're on YouTube. So that this is just. We did this sprint together in person and so on Latchet's board here. And you're going to see that, like, here's where they wrote it out and took a photo of it and dropped it in and then later filled it out on the Miro board.

Beautiful. And it has their old name there. There.

That's right. Yeah. Yeah. Rebrand that lyric, which it turns out, is not the easiest for SEO. There's a lot of lyrics out there.

There's a lot of lyrics. I know some lyrics. And just to understand is the next step, the Design Sprint. And that's where you actually start testing.

Exactly. So if we zoom out now, we see now they're going to head into a sequence of design sprints running one after another. Each of those design sprints starts with the founding hypothesis. Then the team is going to say, okay, what are the biggest risks that you know, that hypothesis not being true, what do we need to assess right now? Going to make a map of how customers discover the product, what that core experience looks like, and then figure out, using that map, where's the key moment for assessing that risk. So for them, the biggest risk is, do people even. Will these artisans even want this thing? Are they actually going to decide the key moment for us to test that? It's actually on the landing page. They figure we can prototype landing pages that describe the product and learn a lot. For our first experiment, just. Just with landing pages, they're going to sketch solutions. This will be familiar to anyone who's, you know, heard about design sprints. You're going to each person sketching their own proposal for how that key moment should work, choose the strongest of those. In this case, they choose, they're going to actually prototype three things. So they test three things head to head against each other, fake brands for each one, so they look like three different products. And then this is a really key part. At the end of the Design Sprint, we've got a scorecard. And this is actually a new innovation. This is not in the Sprint booth.

Oh, shit, here we go. New hot off the presses. Design Sprint improvement.

So this scorecard is going to break down the founding hypothesis. Hey, as we talk to each customer, was this the right person? Is this the right kind of customer for us? Do they have the problem that we think they have? Was this the right approach for them? Did they choose it over the competition? They're going to test these prototypes head to head and also show people like, okay, here's Etsy, here's Shopify. Now, out of all these five options, think about out loud about, you know, how do you compare these? So do we believe they'd actually choose it, that the differentiation actually work? Are those differentiators valuable and motivating to them? Does it click? So our new book is called Click. And the idea there is, you can see when a product clicks with one person, and that's a helpful Signal. Now, granted, these interviews are kind of a simulation. It's not like the real world, but they're a helpful signal that we're on track for product market fit. If we see it, gosh, this product just seems to be clicking with customer after customer. That's a really strong signal and that's when people start to get the confidence that it's time to build.

That's a really good term, by the way. That's such a good way to describe what it feels like. It doesn't just click with them, just kind of clicks.

Yeah. And if you look across Latchat's first scorecard, there's a ton of red. It's a lot of things that didn't work. And the conclusion at the end in this last column, there's a conclusion. Hey, we interviewed this case. They interviewed four customers. Well, it looks like this is the right customer. It looks like they have this problem, but I want to have a community sharing sort of sales platform. And they just. Any hypotheses kind of about the prototype itself? Just lots of red on here. So they sprint again and just zooming.

Out for a second. This is a team who just started working on this new company and you know, sometimes it can feel slow. We talked about it feeling slow to go through all these steps, but they're only a week in and they've already built three prototypes and they've tested those three prototypes with four real customers and they have this super detailed scorecard of here's what's working, here's not what's not working, that's after a week. So it's interesting how what can feel slow in the hour to hour actually can really speed you up in the weeks and months timescale.

That was such good context because I was feeling that. And to your point, most founders do not do this much testing, iterating, learning in the first few weeks of their startup.

They might spend a few weeks just talking to customers without showing a prototype and then they might spend a few months building an mvp. And then they might if, you know, maybe they're going to spend some more time talking to customers while showing them the mvp, maybe they'll do manual onboarding, something like that. But yeah, that plays out over months. And through this process with us, they say that they're able to accelerate three to four months of work into the three or four weeks back to back sprints that we're doing together in character labs.

Excellent context. Thanks for throwing that in there.

And these conversations with customers are so much more fruitful. And pointed when you've got the context of I know exactly what my hypothesis is. And you have prototypes to show them. We have a founder in our group of startups and character labs. At the moment, I'm thinking of Maruthi John, who comes from doing sales at Rippling and had been talking to tons of customers while starting off the his company. And he said, you know, I had 50 conversations over the past month, but I learned so much more.

This all makes sense as you guys describe it. Like you're, you're actually testing something very concrete that your entire team is aligned behind and actual prototypes, and you've thought about different directions. So you're testing something very specific versus just generally testing at your general concept.

As we go into the second design Sprint for Latchet, they're making some edits to their founding hypothesis. Now they're revising a few things, making new sketches, new proposals for what this solution might look like. They've learned a lot in that first Sprint. A new prototype that's got a prototype that has more detail now. So they are engineers. They're starting to actually write some code and put some more detail behind the product. It's more robust. And again, they're trying to fix that positioning. Here's their scorecard, and if you're watching on YouTube, you'll be able to see it. But again, there's a lot of red here. At first blush, the scorecard is bleeding, but there are some promising signs. There's like maybe a few little sun breaks. There's some spots where some of the red has started to flip to yellow. And so if we look at the conclusion on the far right, they're starting to believe their differentiation is dialed in and they're starting to believe that this could be the right approach. They may be able to get people to choose it to the competition, even though they haven't done it yet. So those are starting to become yellow lights on the scorecard. And now they'll take what they've learned. And now we're into the third consecutive week of design sprints. Again, they're going to sort of review that founding hypothesis. They're going to sketch. They're recruiting a new slate of customers, as they do each week, a new prototype. Again, more code in the prototype. It's becoming more and more robust, more realistic, as they're also adjusting the marketing and the positioning at the same time. So all of these things kind of go in concert. The product itself and the marketing are sort of one, as they're, as they're moving Along. And this is an extreme example.

What? Everything is green.

Everything's green. If you can't see, every single one is green.

Oh, my God.

And this is. This is extreme, but it is a pattern that we've seen. This is real again and again. This is a real example.

Wow. How do I invest? Get us in this round. This is great.

Yeah, this is pretty great.

This is great.

So we see this again and again. And I can share a couple of other boards of ones that are in progress. We're also constantly adjusting the templates so you can get to see a little bit more how people will edit their founding hypothesis from Sprint to Sprint. So, you know Mello, who we were talking about, here's their first prototype, and here's their first scorecard. Lots of yellow for them. Maybe they're a little bit more likely to use yellow than red. And then here's the edits to their founding hypothesis after the first sprint. So you can kind of see in red. They're changing the. Slightly changing the definition of their target customer from the first week, slightly changing the problem that they're solving, slightly changing the approach, slightly changing the competition. They've dialed in, they've gotten more crisp on who are we up against? They've gotten a little bit more crisp. Just a tiny tweak on how do we explain this to people to get them excited about it? What's the differentiation? They sprint again, they prototype again. And if we just jump down just looking at hypotheses, they learn a bunch. And now there's another slight tweak to that founding hypothesis. And so week after week, you're learning, but you're also really able to. Able to track exactly what is it that we learned and how does that affect our strategy, all of which is based off of, you know, pencil sketches. We can go back and see the sketches he's doing on paper to define, this is what I think needs to be in there to make this compelling to deliver on my differentiation. And then he's using a product video so that the entire thing doesn't have to work fully freeform. That's what it can look like when a team is building something that's more AI centric, when it's a more sophisticated tool, when people are going to be curious about the ins and outs of it.

So along those lines, where do you find people are leveraging AI most in helping them through these sprints, through either the foundation Sprint or the design Sprint? Is it mostly just by coding prototypes?

That's definitely the first and biggest use of AI in Sprint so far is in making prototypes that look more realistic, faster. And it's kind of like having an entire prototyping team on standby, right? So that you don't have to just make it yourself and sort of piece things together, but you can have know, a ton of people ready to jump in, make something look really realistic. But it's also really critical. We found that while you're outsourcing that prototyping work, you don't outsource the thinking. Like, you don't kind of skip over the part where you think about, well, what is the actual copy on the website? How do I actually describe what the product is, how it's differentiated? And so it's one of the reasons why doing the foundation Sprint first and then doing a design Sprint can really help you because it allows you to spend time working on that harder part of what it means to design and build a product. And then once you have a clear view of that, then you can use AI tools to go really fast. And in this example that Jake is showing of Axion Orbital, people get really clever about which parts of this need to be real, which parts of this can be vibe coded, which parts of this can just be a static figma mockup. And it's all about kind of creating a simulation, something that looks realistic that you can put in front of real customers to help you answer the key questions.

That's a really good point that you're making. And again, it's just a reminder you'll move faster if you slow down a little bit at the beginning. That because prototyping is so easy now and just things that look. It's so easy to make something that looks really nice and kind of it's doing what you want, but spending a little time making sure you understand what you're testing and what you want is becomes more important.

We had a couple of teams in this current group of character labs where they jumped to Vibe coding prototypes, like right away, like at the very beginning. And you know, when you. When you generate something using a. Using an LLM, using an AI tool, like, it looks pretty real. Like it looks, you know, it looks believable. And so I think there's a temptation to say, like, okay, like, this is. This is good to go. Like, it looks close enough that I'm just going to, you know, show that to customers. And then what they found was like, actually the, you know, it was. So it was super generic. Like, it didn't really describe what the product was. It didn't really Describe how it was different because, you know, it was, it was generated by a model that is trained on, you know, sort of existing products. And so in that second sprint, that was when they really took a step back and said, okay, let's think through this and then shift into prototyping mode. So it's definitely helping people speed up. But we also think there's an important lesson here that while you're outsourcing prototype prototyping, don't outsource the thinking as well.

I see you pulling something up, Jake, that might be.

Yeah.

Imagine you want to show.

Yeah. I think it's kind of interesting to see the sketches that went into Diminjay's prototype, the Axiom Orbital prototype that we just looked at, because they are super detailed. And this is doing this level of thought where you're, you're pausing, you're being really intentional about what does the customer need to know, what needs to happen for them to find a solution to their problem on, you know, and within the product. That's a way of doing your prompt engineering. If you end up vibe coding this prototype, but you start off with a very clear plan about this is what the thing needs to look at, look like. Rather than going immediately into a conversational mode where you're sort of co designing with the LLM and going back and forth via a, a chat conversation. This is much likelier to yield an opinionated product that makes sense, that's very clearly defined around the problem that you're trying to solve, the tasks that need to happen to solve that problem, and the right messaging, the right wording that's really crisply aligned with what you know about your customers, what you know about, what they care about.

That's such a good point. Again, just the concept of the primal mark is ringing in my head as you talk about this. Just as soon as you make that prototype, everything from that point is a response to that first idea versus have I actually thought through what this should be? Guys, we did it. This is incredible. I think this is going to help a lot of people think through and actually save a lot of time. Is there anything else that you want to share? Leave listeners with maybe a last nugget or something you want to, I don't know, just double down on to leave folks with before we wrap up?

Well, one quick thing is that we've, we've shared a lot of examples in this conversation and we actually have a template, a Miro template that folks can use if they want to run their own foundation. Sprint. It's the template that we use when we're working with founders, taking them through these sprints. We do our work in Miro. Even if we're in person with them, we're usually working in Miro or maybe working on paper and then capturing it in Miro because it's just such a great canvas to work on. And we'll make that template available so anybody who's listening or watching can grab that and use it to run their own foundation Sprint.

That's amazing. You answered the question asked that I forgot to come back to. Can we give people a URL? We'll put it in the show notes, but should they. Is it at your. Yeah, I guess. Where can folks find it?

You should find it at Character VC and you can go there and we'll have a page for you.

Okay. Amazing.

So easy.

That is awesome. That's so awesome that you guys are doing that. Obviously you could also read the book and that goes through a lot of this process, but I think the template is just like a plug and play. Let's just do this at home. Obviously, if they want to go deeper, they can work with you guys. Have you. It's such a win. They take money, you give them money and you help them figure out what the heck to build. What a deal. And that's also Character vc if you want to explore that.

Yep.

Amazing. Okay. Is there anything else, Jake, that you wanted to share before we close up now?

Just, you know, if, if you made it this far, hopefully your. Your mind and heart is. Is open to this idea. But we know it's a lot to ask to clear the calendar and follow these. These steps. But if John and I weren't so convinced that beginnings are essential to getting your best efforts in the hands of people and to achieving the. The things you want for your customers, we wouldn't be doing this. We wouldn't be going to all the trouble. There are simpler things we can do. After the kind of cool thing we've found about working in this way, though, we've focused a lot on finding product, market fit and building your business. Getting started, getting momentum, getting alignment. All these things that tactically are important, that business wise are important. But another part of it that's a nice side benefit that actually maybe is the most important thing of all is how close it brings you to your customers, to the people who you're building for, because you're interacting with them, you're focusing on them as you plan, and you're interacting with them on a weekly basis when you work in this way and how close it brings teammates together in a very authentic way. We're working together on the most important things and we don't have to navigate the usual social dynamics of conversations where one person has an idea and they're pitching it. We don't have to navigate the constant context switches of the calendar that dominates our days. We're just working on the most important thing. And the structure takes care of a lot of the difficulty of the process of what we should do. And we just find people come out of it with renewed motivation, renewed energy, and renewed enthusiasm around the fact that they get to work on what actually matters to them.

Yeah. And it just feels like really fun. Just this part of the process. So fun. And then not having to decide how to approach it. Having someone just give you here's a framework to follow.

It's like a yoga class, right? It's like I don't know how to do yoga, but explain to me Step by step.

Yoga for Startups. That'll be the title for this episode. Guys, this was awesome. I'm gonna skip the lightning round just cause we've gone long and I guess just where can folks finding online and how can listeners be useful to you?

You can find me on LinkedIn, John. I think find you on LinkedIn too. Yeah, we'd love for people to apply to Character Labs or if you know a founder, apply to Character labs. Get in touch with us. Character vc.

There we go. All right, guys, thank you so much for being here and for sharing.

Yeah, thanks Lenny.

Thanks, Lenny.

Bye everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify or your favorite podcast app. Also, please consider giving us a rating or leaving a review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show@lenny's podcast.com. see you in the next episode.