This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”
He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.
One of the mindsets which we regularly encourage our portfolio companies to espouse is the pursuit of shortening feedback loops.
Shortening feedback loops, or “increasing clock speed,” is fundamental to a startup’s ability to navigate a dynamic market. Accelerating the opportunity for feedback underpins the minimum viable product concept in the Lean Startup philosophy.
The opposite strategy to pursuing short feedback loops is to research a topic profoundly before acting, theorize on every aspect of a project in painstaking detail, and prepare contingency plans for every imaginable outcome. This approach might be effective for long-duration projects, and is generally considered compulsory when mistakes have life-threatening consequences. (Even then however, one could argue that hundreds of thousands of lives could have been saved in the Covid-19 pandemic had governments allowed for shorter feedback loops on vaccine safety testing among consenting and fully-informed volunteers). Regardless, such an approach is nearly always a handicap in startups
The ability to iterate: design, build an MVP, deploy, collect market feedback, repeat — is crucial for a startup to find product market fit. Testing iterations of its product with real customers is the fastest way to obtain indispensable market insights which will guide the product road map. This is widely considered obvious in most innovation ecosystems today, but I am still surprised to discover corners of the world where this belief is not yet universal.
Beyond the obvious though, a mindset of short feedback loops extends beyond a startup’s initial product-market fit. It should permeate throughout all company operations: sales, human resources, investor relations, vendor management, etc. Operating with short feedback loops fosters agility in a startup and can be a source of competitive advantage by accelerating learning. (Conversely, in crowded or fast-changing markets, failing to do so will be a competitive disadvantage).
Good salespeople, for instance, naturally crave immediate feedback. Moreover, it is human nature to thrive on short feedback loops, starting from our first steps as toddler. Here’s one example of academic research in this area.
Providing fast and frequent feedback to employees is also critical. When employees in a startup are not clear on whether their work meets expectations, or even whether they are working on the right priorities, the collective focus of the organization drifts. This can also undermine motivation. Similarly, it is a startup CEO’s responsibility to create an environment in which subordinates are comfortable and encouraged to provide feedback upward.
Shortening feedback cycles to investors also brings numerous benefits. Frequent business updates will keep a startup at the top of mind among its investors, which makes it easier for the investor to be helpful, be it with client introductions, capital raising, even hiring, for example. It also serves as a preventative mechanism, by keeping investors on alert before a startup’s financial situation becomes dire.
For many entrepreneurs, this behavior comes naturally. We applaud this and encourage all of our founders to embrace it as a core habit.