A simple framework to identify and articulate a problem-statement.
Whenever I’m approached by someone with a “great startup idea” I ask a deceivingly simple question:
“What problem are you solving?”
First time founders normally respond by launching into a 5 minutes diatribe about an amazing opportunity or disruptive technology — often they’ll miss answering the question all together. Veteran founders provide a problem statement.
What is a problem statement?
Problem statements have long been a secret weapon of six sigma black belts (the “Define” part of DMAIC) and customer-centric designers (Step 2 in IDEO’s Design Thinking process). For startups, it’s a concise description of the problem your startup is trying to solve. It should answer:
- What is the problem?
- Who has this problem?
- Why is this a problem?
Here’s an example of the problem-statement I constructed while commercializing Magnet Resonance Elastography (MRE) — a new type of MRI scanner developed at Ohio State.
“75% of the 1 million+ annual biopsies for prostate cancer produce inconclusive results. This results in a $4B loss to the healthcare system and ~8% of patients being hospitalized for complications.”
MRE was a technology that had been around for several years but was struggling to attract external resources despite the groundbreaking capability to non-invasively map the stiffness/material properties of an organ. The inventor made a mistake I see common among technical founders — he assumed that technology alone would attract investors. After working together for 6 months, we identified this huge problem in the oncology space that the technology could potentially solve — we won Ohio State’s Faculty Business Plan competition by pitching a solution to this defined problem. Frankly, I don’t think a single judge in that room fully understood the technology (I’ve been studying MRE for the last 3 years now, and I still struggle to wrap my head around it). But that didn’t matter — the judges recognized the magnitude of the problem and were willing to place a bet to help us solve it.
Nailing an effective problem-statement has cascading effects:
- It solidifies a hypothesis regarding product-market fit making testing/iteration cycles faster
- It simplifies the elevator pitch when explaining an idea to family, friends, investors, customers, uber drivers, baristas, etc.
- Most importantly, it provokes the question every founder should ask themselves: Why does this matter?
Ask Yourself: Why, Why, Why, Why, Why?
The most effective tool I’ve used to build a problem-statement is a Root Cause Analysis method known as “The 5 Why’s.” It’s something you’d expect from a 4-year-old — but was actually invented by Taiichi Ohno, the founder of the Toyota Production System (known in the US as the Lean Manufacturing). The genius behind this method is the combination of simplicity and efficacy. Here’s how it works:
- Create an initial statement defining what the problem is and who has it.
- Ask that statement — “Why does this problem occur for this population?”
- Your first Why (we’ll call this Y1) is the starting point — ask yourself “Why is Y1 happening?” — This will be your second Why (Y2)
- Repeat step 3 with Y2 — do this for 5 repetitions until you reach Y5
It’s that simple. We’ve all known kids that ask “Why?” repeatedly until a point of mutual exhaustion. This stems comes from the growing brain’s need to simplify and identify the root-cause. So, be childish, and find your startups core problem.
To illustrate the effectiveness of this technique, here’s how I used the 5 Why’s to define an EdTech SaaS startup’s problem-statement that was developing a new recruiting tool for universities:
Our initial problem-statement:
“University admissions offices spend too much money on recruiting students.”
Why #1: Universities are unable to cost effectively identify potential applicants for their in their program, so they mass market (think fliers in the mail) achieving a >$2500 cost per applicant
Why #2: Admissions offices purchase low-quality leads (from organizations like the ACT) to generate mass mailing lists
Why #3: The leads are low quality because they provide minimal demographic data and no proof of interest
Why #4: There is no proof of interest because students are unable to demonstrate their interest to the university
Why #5: Students are unable to demonstrate their interest because that requires physically attending events (doesn’t scale and not accessible for most) or reaching out via cold intro (hard for a 17 year old senior)
Based on Why #5, the new problem statement:
“Universities cannot selectively target students who are interested in their programs”
This might appear to be a subtle change, but this fundamentally shifted the company’s approach from building a lead generation platform focused on tools for admissions officers to a student-focused platform that used an algorithm to identify the “right” schools for students and enabled them to let a school know they were interested in applying. This shift in product focus led to the company landing its first customer (and next 12!)
The Last “Why”
A company’s problem-statement is its “true north” — I cannot stress this enough. The best startups have defined this so well that every employee — from CEO to summer intern — knows their problem-statement verbatim. It’s what attracts great talent. It’s what attracts high-profile investors. It’s what keeps you moving when things go wrong (and they always do).
Spend some time today and ask yourself “Why?” — Then do it again!
This was originally published on Medium.
Silicon Valley Bank could not be more excited to continue our global partnership with Techstars. SVB and Techstars are deeply aligned on #givefirst. Our mission is to increase your probability of success by going beyond banking to be a valued partner to teams in the Techstars family.
This year we look forward to expanding our relationship through relevant, informative content, creative banking solutions for new companies and Techstars alums, innovative programming, and providing you with a broader venture network.
The goal of our partnership is to leverage the synergy of Silicon Valley Bank, the bank of choice for the world’s best technology companies, and Techstars, the most impactful global startup accelerator, in order to scale and support the strongest global community of founders and startups.
Just as the Techstars Network continues to support you beyond the program, so too does our commitment to founders and clients. The SVB team is available to you as you grow:
- Fundraising Strategy/Advice and Pitch Practice
- Capital Solutions from a Credit Perspective
- Recommendations on other Partners or Providers
- Hiring Needs (we can’t promise, but consider us an extension of your network)
- Connecting to the Broader Founder Community
We are uniquely positioned to help accelerate the success of your company in banking and beyond. SVB works with the majority of venture backed companies, and sits at the intersection of all things tech including founders, investors, innovation and capital. Start your relationship with SVB or reach out to me directly. I’m looking forward to meeting you.
We recently spoke with David Mandell, cofounder and CEO of PivotDesk, a Techstars in Boulder 2012 company. PivotDesk helps startups that need space find host companies that have space.
David talks about the company’s relationship with Silicon Valley Bank. SVB is banking the world’s most innovative companies, and has been a sponsor partner of Techstars for nearly four years.
How did PivotDesk meet SVB?
I’ve been working with Silicon Valley Bank for more than ten years. First with other startups, and now with PivotDesk.
How have PivotDesk and SVB worked together?
They’ve been a great networking and business development partner. There are really three key ways that SVB has helped PivotDesk:
First, they understand the needs and dynamics of a startup. There are no weird reactions to what we’ve got going on at the company because they understand startups from a market perspective and a growth perspective.
The second way they’ve been helpful to us is through access to their network. SVB’s clients are potential clients for us as well. So our partners at SVB have done their best to cross geographies to introduce us to others where it makes sense. The are a great business development partner to us.
Third, they put a spotlight on us. They invite us to contribute to conversations that are a huge benefit to a company at our stage. As an example, SVB kindly hosted our team for SXSW – saving us on expensive hotel rooms and connecting us with contacts who could really help us move the needle forward. One of the best parts? SVB’s CEO joined us for dinner and gave us time to pick his brain. It’s not too often that a company like SVB gives you such direct access to their resources and we’re thankful for it.
What do you think sets Silicon Valley Bank apart?
I’m not pushing a huge rock up a steep hill every time I talk with my banker. SVB understands startups. There are no weird reactions when I tell them what’s going on in my company: from cash flow, to banking account structure, to the speed of change in a startup—they get it.
They also have relationships across the VC community and understand how venture capitalists operate, which makes our banking easier. I don’t have to explain the process to them.
Do you have any advice for other founders who want to build good relationships with their banking partners?
Look at your banker as a partner. The more your banker understands you, your business, and how your business functions, the better they can serve you. If you—whether you’re the CEO or CFO—don’t make the effort to help that relationship, a productive relationship is not going to happen.
What’s the latest and greatest in the PivotDesk world?
This summer, we released a product called Cultivate that leverages the PivotDesk marketplace to enable commercial real estate brokers to help growing businesses avoid the static nature of traditional office space and find solutions that make sense for their needs today.
Cultivate means brokers no longer have to say no to servicing smaller clients. Instead, the platform allows them to find flexible space for growing businesses, help offset costs for larger businesses with extra space and manage their relationships with these businesses as they grow and change over time.