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The holy grail of startups pre PMF: Solution-Problem Fit
I had it once. At least I thought I did.
I will take you through our learnings in order of:
How we got the idea of our previous product
How we sold
How we discovered we were solving a non-problem
Final learnings
1. How we got the idea of our previous product
Gaming
We were never web3 degens. Yet with the funding craze of 2021-2022, we saw the huge traction web3 gaming was getting.
From my previous job, I knew that gaming companies relied on advertising on Facebook and Google extensively.
A benchmark was that they were spending 80% of revenue to acquire more users through advertising. The cost per install was only going up and up, squeezing the profit margins and LTV/CAC ratio.
The reason for this is simple:
Free to play gaming has around 2-3% of a conversion rate for paid subscriptions.
Hence they need to acquire users who are likely to pay.
They target people in US, rich EU countries and Japan to target people with high purchasing power.
Noticing this we came to the realisation:
This data is all public and decentralised in web3. You can literally see a wallet as if it is a bank account. What products are they buying, how much $ worth does it have, how often they spend and more.
Let's offer the data to game publishers.
Pain point
When we talked to customers, they told us that this data is amazing. However one core aspect was lacking:
Even if they analyse the data, how could they use it? The wallets were anonymous and they had no way of reaching out to their target audience based on the wallet data they analysed.
We had found the opportunity:
Gaming had huge funding rounds so they had money to spend.
Traditionally they were spending huge money on user acquisition so no risk there.
If we can match consumer social media data to web3, we would be the only company with such algos and database which would give us a great competitive edge.
2. How we sold
Now it was time to go to market while we were building the product. I quickly developed a sales script and messaging to deliver what the product did.
This is something I still use today as it is quite punchy. Here is how it went:
Mert: So how are you acquiring users today?
Game Studio Customer: We don't have a particular way, it is very random. We advertise on Facebook too but it is very expensive.
Mert: Do you use web3 wallet data to analyse gamers and target them?
Customer: Yes, we try to analyse them but it is too complex and time consuming. We stopped because we can't use the data.
Mert: What do you mean you cannot use the data?
Customer: We cannot target people on Twitter/Facebook using how much money they have in their crypto wallet.
Mert: That's what we do. We can tell you which Twitter users own which web3 wallets and the data that comes with it.
Customer: How much does this cost?
3. How we discovered it was not a burning pain point
We started selling our product, giving free trials and product demos left and right. Built our database and onboarded more customers.
Despair
We spent months working on the product, reaching out to more prospects, onboarding new people. However:
people were signing up, using it for a day and churning out.
willingness to pay was low.
When we went back to our free trial customers, they told us the following:
We are not doing marketing. We should do it but we are leveraging free channels.
Consequently, most web3 games were limited to around max 10,000 active users. They were not trying to get more users => they were not able to convert enough people => no revenue led to no marketing further.
Here is the punchline we discovered:
You cannot make people something they don't want to do. Your solution can solve a seemingly burning problem. Yet the problem might be something people are not willing to solve.
In our case web3 gaming companies considered user acquisition and scaling a problem. If they had more users, they would make more money.
However, they were simply not willing to do marketing, advertise and spend money on this job.
This led to our current solution and rethinking the market we were operating in. More on that later.