January 11, 2025 10:00 PM (GMT+2)

In 2020 when we were at the beginning of our startup journey I had a conversation with Erik Goldman where he shared this process, which we used to start Column Tax. I'll be forever grateful for Erik's time, and I thought it worthwhile to capture Erik's wisdom permanently online so others could benefit as much as I have.

Intro

Navigating the early startup idea maze and finding a (good) startup idea to work on is incredibly tough1. Having a process can help you a) find and validate a good startup idea and more importantly b) stay sane by feeling like you're making progress while doing it.

In this post, I'll explain a well-tested process for finding early Product<>Market Fit called "Hypothesis Sheets", why the process is useful, and how to follow it. This process works to validate startup ideas for venture-scale B2B companies. This process has led to many billions of dollars in market cap created. This post is geared toward starting a B2B company — if you're starting a B2C company2 I believe Hypothesis Sheets can help, but that's not my area of expertise — good luck 😂.

Starting a venture-backed company is never easy, but this process can help make the early days slightly more enjoyable.

The process boils down to 4 steps:

  1. Come up with a list of ideas/target customers
  2. Decide on a target idea/customer type to validate
  3. Validate that idea/customer type using Hypothesis Sheets
  4. Continue de-risking or move on to the next idea/customer type

Let's go into detail on each of these:

The core idea: startups are a series of hypotheses

Companies are a series of hypotheses. Similar to the scientific method, successful founders are able to continually set the right hypotheses and prove/disprove them to move the business forward.

An untrue hypothesis that the business relies on represents a risk. The process of moving a company forward is the process of de-risking the company's biggest risks.

In the beginning, the core risk is "what problem should we tackle?" — while later a risk might be, for example, "can we sell to larger enterprise customers?"

As a founder, you should always be de-risking the business's top risks. But this is especially important to be doing in the very early days. You should be more rigorous and analytical than you expect on day 0. The Hypothesis Sheets method helps bring rigor to this very ambiguous phase.

Finding Product<>Market Fit