The top 5 early-stage startup lessons for 2025

We go through the top 5 product-market fit lessons I've learned from speaking to well over 100+ founders on this show over the last 3 years.

These are the top 5 things you should keep top of mind going into 2025.

Why you should listen:

• Small teams outperform larger ones in early stages.
• Paying employees well is needed to build A+ teams.
• Go all-in on fundraising to do it faster. 
• Mind your burn rate to maintain flexibility.
• Creating undeniable value is essential for growth.

Keywords
product market fit, startup strategies, fundraising, small teams, value creation, entrepreneurship, founder insights, business growth, early stage startups, team dynamics

Transcript

Pablo Srugo (00:00):

So in 2024 we did 80 episodes of the product Market Fit show. And in total we've done well over a hundred episodes of some of the best founders in the world, the founder of Glean, Huntress ,ID.me, Wealthsimple, Koho, Cohere, so many unicorns, so many companies that did over a hundred million in revenue. And we talked to them only about what they did in the first few years of their business, how they got to one, two, 3 million in ARR and we went super deep with them. And now kind of going into 2025, here are the top five things that I got from everything that we've done so far. 

Pablo Srugo (00:37):

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Pablo Srugo (00:53):

The first one is that small teams absolutely outperform in the pre-product market fit days, they outperformed like literally every single time. What I've noticed is some of the founders that I've talked to weren't able to fundraise, they had to bootstrap, they had to have small teams. But there's actually a lot of founders who were able to raise, maybe they went to YC and then raised like three and a half million right out of the gate like Ashby did. Or maybe they were exited founders from before and raised 6 million plus dollars outta the gate like Bridge did, which just got acquired for over a billion dollars. But what I've seen consistently is that in almost all cases, regardless of what resources they had, they kept their teams small until they found product market fit, finding product market fit-. It's not just that smaller teams lower your burn.

Pablo Srugo (01:43):

That's not the only reason to keep a small team. The thing is that five people, seven people, certainly way less than like 15, 20 people, a really small amount of people, 3, 5, 7, this is what we're talking about, right? Having that many people on your team makes it much easier to find product market fit. Because in the early days the game isn't about output, it's about learning. And the goal is to have everybody a hundred percent fully aligned, everybody exceptionally close to customers, everybody understanding all the context all the time. So you don't have to waste time managing, disseminating information, aligning people. All that stuff is overhead. Like at a bigger company you're forced to do all these things and so you kind of trade the ability to do more. You trade the ability to have scale, but the cost is overhead. The cost is speed of execution.

Pablo Srugo (02:31):

In the early days, what you want is speed of execution. What you want is quick experimentation. What you want is fast learning and all that stuff is much easier with a small team. The second thing is that you need to pay people what they're worth. And the reason that I say that is that's the only way you can really build an A plus team. Take Rob Kazam, he is the founder of Float. He told me specifically he pays at the 90th percentile. Now, I don't think everybody needs to do that, but I think most probably do because the reality is every single founder is out there saying we need to build an all-star team. We need to have A players. They believe that they have A players. And why do you need that? Because you're competing at the absolute highest level. You are competing globally.

Pablo Srugo (03:15):

Like literally you're trying to build an NBA,NFL, NHL , pick your favorite league. That level of team, like that's the best analogy, right? You think of it like a sports team and you have to be a little bit cutthroat about it. That doesn't mean you don't treat people with respect, it doesn't mean you fire people on a whim. It does mean though that the best analogy is a sports team and it's all about performance. So it's all about keeping people that are on the team performing. It's also all about attracting the best people to your team. And the reality is, A players have tons of choices. So they're not necessarily gonna go for the highest paying opportunity at any given time. That's actually part of what makes him A players. But if you think that just because you have a mission or a vision or you just are really compelling as a speaker that you're gonna consistently land A players, it's not gonna happen.

Pablo Srugo (04:06):

You might get lucky here and there, but in general it's gotta be the full package. Like A players can get all of it, they can get the hype company that's raised a bunch of money, they can get the great storytelling CEO, and they can get the great pay package. And so you have to kind of build all that up. And sure you can't pay what Google's paying, what Open AI is paying, but you gotta look at your market, your stage, and you've gotta think about a strategy. Like you gotta be strategic about it. You gotta think about, okay, how do I set things up so that I'm going to consistently attract and keep A players? And you can't lie to yourself about it and believe that by underpaying people you're somehow going to get there. You're not. The other thing I've seen consistently comes down to fundraising.

Pablo Srugo (04:45):

So take Pylon, right? Which we just had on. Pylon raised their seed round in six days. They raised a $14 million series A from a 16 in 17 days. We had TaxWire on here, which raised one of the most like process oriented seed rounds I've ever heard of. They talk to 120 VCs. And what I've realized is if you want to raise faster, you have to do more work. I think a lot of founders get this wrong where they kind of say to themselves, look, I just don't wanna waste time fundraising, I don't wanna spend time fundraising. And so they kind of do it on the side of their desk, they do it ad hoc, they don't pay attention to it. And what ends up happening is they actually spend way more time fundraising paradoxically than the ones who go all in. If you go all in and you have a strategy about it and you really think through what you need to do at every single stage to maximize your shots of fundraising, that's how you get a round done in six days.

Pablo Srugo (05:36):

That's how you get round done in 14 days. 'cause what you need to do those things is FOMO. You need insane FOMO and momentum and you can't get that unless you go all in. And so what, what I've seen in terms of some of the best processes for raising a seed round a series a, a pre-seed round, is to do a lot of upfront work. And the upfront work is mainly, it's not like having the data room, it's not any of those fancy things. more than anything, absolutely top of the list. It's a relationship game. It is about thinking through strategies of who you want to go after, how to get introductions to those people, who are the best introductions when and what to say to those people. Like the guy from Pylon, Marty from Pylon, what he said was he would have founders email potential investors and he wouldn't say, Hey, I met Marty and I think it's a great opportunity, you should take a look.

Pablo Srugo (06:26):

He wouldn't say, Hey, Marty's fundraising, are you interested? He would say something that would generate FOMO. Like he would say something like, Hey my friend Marty's raising around and it seems to be moving pretty fast. Have you, have you guys met them yet? If not, you definitely should. And I mean, as an investor receiving that from a trusted person, you kind of have to look into it and you have to look into it very quickly. And he did this strategically. He did this across dozens and dozens of people. And so he had stacked meanings back to back to back to back. And that's what happens when you do that. Sure, you have to go all in for like a month or so where you, you frankly, you do have to let a lot of other things go. Like other things might suffer as a result.

Pablo Srugo (07:00):

But the upside is if you wanna raise around, this is the way to do it. And ultimately you'll raise on the best terms from the best VCs in the fastest possible time frame. The fourth thing is, this is something that I- I mean I love this change like from 2021 and 2022 till now it's been night and day like I just think founders are march smarter now and consistently I'm seeing founders think a lot about keeping their burn tight, whatever that means. Whether that means default alive, whether that means profitability or break even, or whether it doesn't, just minding that burn. Because I think one of the biggest damages that happen in startup land lately is this idea of blitzscaling. And I don't mean to say that Blitzscaling is never right, it is right. In fact many companies do need to do it. I don't think Uber would be what it is today if they hadn't done it, I don't think PayPal would've worked if they hadn't done it.

Pablo Srugo (07:43):

I think there are select instances where blitzscaling and going crazy on hiring and spending and driving up burn makes a lot of sense. I think the problem is it makes a lot of sense in much fewer cases than you might otherwise imagine. And in even in cases where the outcome can be massive, where the outcome could be billion dollar outcomes, it's still in, in most cases I would argue it makes sense to really mind that burn to build a solid business instead of just going after the hype and trying to raise as much and then outspend everybody else. There's only some select highly network effect type business where that take tends to make sense. And so I think that's the number four thing. Mind that burn, keep that burn tight, it increases the optionality so much. It's so favorable, especially as a founder, because the last thing you wanna do is be forced to raise, increase the prep stack and really just have your back against the wall.

Pablo Srugo (08:36):

And I don't think, and I actually think in many cases the idea that you'd have to trade kind of profitability for growth is overstated. Obviously if you spend more money you tend to be able to grow somewhat faster, but there are pretty crazy diminishing returns. And so finding that balance as to where you're actually getting optimal leverage on your spend and keeping burn tight throughout is critically important. And then the other thing I’ll say is, you know, we've spoken now to quite a few startups that failed and there's some where it's just luck of the draw, like bad luck basically. Like we had Wyre on recently, I mean he got the 90 million in revenue and he had an acquisition that was publicly announced and then ultimately it all fell through. And that was just bad timing. I mean literally the floor fell out from underneath him.

Pablo Srugo (09:19):

Crypto turned around, it was a macro event that I don't think he could have done much about. But in most cases where you look at why did companies not really kind of get off the ground? Why did companies not really get to scale? Why did they fail? And the number one thing I keep coming back to is value, value, value, value. And it's so hard, I think for a founder to be honest with themselves about this. I know I wasn’t and I know when I ran GymTrack, especially after we did a pivot, 'cause we had kind of V1 and then V2, but V2, you know, it sounded cool, it made sense in theory, but it just didn't solve a customer's true number one problem. It has to be, you have to be solving a top of mind problem for your customers.

Pablo Srugo (09:57):

That is the thing I keep going back to. And like it's a necessary condition. It might even be sufficient. You know, I don't think so. I don't think it's that easy to get success, just drive value and you'll be successful. There's so many other factors at play, but it is so important to make sure that you are driving killer, undeniable value, no brainer stuff. Like the sort of thing where you say to your ICP, Hey, this is the thing. And they're like, I need to have that thing. I absolutely need to have that thing. That's the sort of thing that you want to be selling. And I think as a founder, like your time is well spent trying to find that thing much better spent trying to find that thing than not having it and trying to find a way to generate growth.

Pablo Srugo (10:36):

Growth tends to follow the ones that are creating undeniable value for their customers. And sometimes in many cases, companies are able to get to two, five, 10 million in revenue without solving a true top of mind pain point by solving something that's kind of like on the side, but it tends to have repercussions. And that repercussion is that usually, the growth just flatlines. The year is off, it's a fresh start. New beginnings, being honest with yourself about whether you're solving a true top of my problem is the number one thing you should think about. And to the extent that you're not sure or you're not, change it up, pivot, scratch it. Don't be scared to start over. I've seen so many pivots on the show and many of them turn into huge successes and I'll leave you with this. I've had many founders tell me that they regret not pivoting faster. I've had no founders tell me that they regretted pivoting too soon.

Speaker 3 (11:28):

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