Hi, I’m Paras Chopra, founder and chairman of Wingify, a SaaS company known for its market-leading A/B testing product VWO + founder of a consumer company Nintee.
This freely accessible online book contains what I learned while bootstrapping my multimillion dollar, profitable business. There are 65+ effective mental models for startup founders and business leaders.
Hit me up on Twitter if you want to ask a question or have a comment on ideas in this book.
Understanding Markets
1. Capitalism rewards rare and valuable
2. Businesses exist to fulfill human desires
3. Evidence of desire is in people’s behavior (and not in what they say)
4. Be in the desire market, not the solutions market
5. Search for market-product fit, not product-market fit
6. Don’t be a first-mover, be the first one to get it right
7. Only two types of startups exist: technology-led and culture-led
8. Define your market as narrowly as possible
Building Products and Solutions
9. People don’t like using technology
10. All sophisticated solutions start extremely simple
11. Deliver value only on dimensions that customers care about
12. Habits prevent people from switching from the familiar to the new
13. The week rule to prevent failure
14. Steal successful ideas from everywhere
Partners, Ecosystems and Stacks
15. All startups belong to an ecosystem that makes or breaks them
16. Find partners who can grow their business by building on top of your business
17. What you build your business on doesn’t limit how big it can grow
18. Commoditize your value chain before it commoditizes you
Building a Defensible Business
19. Switching costs determine the valuation of your business
20. Compete on cost or quality. You can’t do both
21. Your competitors are just like you: smart and hard working
22. Use all your unfair advantages
23. Do what’s hard (because everyone’s doing what’s easy)
24. Never stop creating network effects in your business
25. Market leaders get killed by non-competitors
Marketing and Selling
26. Assume most people are lazy but market to those who aren’t
27. All new products compete with Instagram for attention
28. People evaluate emotionally and then rationalize their decision
29. Marketing needs to deliver more than it asks
Business Model and Pricing
30. Generating profit requires creativity
31. What people pay for something is determined by its perceived alternatives
32. Your product’s price determines your business playbook
B2C vs B2B
33. Consumers want to conform, companies want to differentiate
34. Consumers hate getting sold to, companies love it
35. Consumers want stuff for free, companies want to pay
36. It’s winners-take-all in B2C, while B2B is a long tail
Making People Care About Your Business
37. Your 30 second pitch shouldn’t be about you
38. Get press by giving journalists something surprising
39. Raise funding by showing how you can raise even more funding
40. Recruit exceptional people by showing them a promised land
How Investors Value
41. Your business is worth all future profits it is expected to generate
42. Business quality is determined by one metric: return on invested capital
43. Investors will prioritize financial returns over your ambitions
44. Great entrepreneurs think like investors
45. Profit overpowers ethics, if left unchecked
Business Trajectory
46. What kills startups is the lack of feedback
47. Study your most successful customers to set your direction
48. Your north star metric should be a leading indicator of profits
Incentives, Culture and Organization
49. Your team’s culture is defined by your behavior, not your words
50. Don’t hire for roles, hire for a change
51 . People don’t leave companies, they leave their bosses
52. The number one job of a founder is to communicate clarity
53. Aim to be a cult by hiring people who obsess about the same things
54. Your company’s org chart is more important than you think
55. You’re probably not a good leader (because being that is so hard)
Avoiding Cognitive Biases
57. Always seek disconfirmatory evidence
58. Never ask your friends or family if they like your idea
59. Ask people what they did, not what they will do
60. Stop assuming that your customers want things that you want
61. Think from first principles before you Google (or ask ChatGPT)
Meta
62. Startups live and die in a multidimensional landscape
63. You can only succeed if you know how you can fail
64. Wealth is not money, it’s the things we use money for
65. Solve the most important problem that you can personally impact
66. Startups thrive under uncertainty (of the right kind)
67. Startups shouldn’t solve technically hard problems
68. Moats for deeptech startups
Why should you read this book mental models
My first startup had a simple business model: put up free software on the web, wait for people to download it and then charge whenever someone wanted to customize it. I only had a few customers and I still remember the total revenue I earned by doing this: $100.
It wasn’t much but all of it was profit. After all, I was a 14-year-old living rent-free with parents (who also paid for the computer and the Internet connection).
Ever since my first brush with startups in 2005, during the last 15 years, I’ve done several startups, most of which failed but one succeeded. Fortunately, in entrepreneurship, all you need is one success to make all the failures worth the effort.
The last startup I founded, Wingify, is no longer a startup because today it’s a mid-sized company employing a few hundred people. I’ve enjoyed both successes and failures in my career because only through a contrast between the two, I was able to figure out what factors tilt the odds in which direction.
Had I been successful with my first startup, I would have never known whether what I did was replicable by other entrepreneurs. Similarly, had I never seen success, all I could tell others is what not to do. But since I’ve tasted both success and failure, I feel confident of doing introspection into my experience to derive (hopefully) generalizable and replicable insights into the art of doing startups.
After 10 years of working nonstop and growing Wingify, I took a month-long sabbatical and started writing a series of essays on this blog (Inverted Passion). Gradually, a small community of entrepreneurs and enthusiasts developed around the blog and they encouraged me to expand them into a book. While the essays I wrote had no particular structure or organization, this book is written from the ground up to methodically cover different aspects of startups. From understanding markets to product design to building teams to business ethics, I’ve tried covering everything that an entrepreneur may need while doing a startup.
There are many excellent books on startups and I didn’t want to put out yet another book that’s similar to existing ones. After all, a book is a product that competes for attention with other books. So in the spirit of following my own advice (something that’ll become obvious in the very first chapter), what I’ve tried to come up with is a different and unique book on startups.
This book is organized around simple but powerful ideas and mental models that illuminate how the world of business and startup is structured. Even though it is informed by my experience, it is not a story of my company. The focus is on core ideas that work in many contexts rather than only in specific situations I encountered. My hope is that once you intuitively understand these deep principles of the startup world, your chances of success will be higher as you’ll be able to recall the appropriate mental model applicable in different situations and get immediate clarity on what to do and what not to do.
So consider this book as analogous to an entry level physics textbook in college. Just like a physics textbook introduces the eternal laws of our universe, this book introduces the eternal laws of startup and business. But, of course, business is a domain of social sciences and deals with humans who’re broadly predictable in large groups but extremely fickle individually. Hence, unlike physics, you may discover that the laws in the book contradict with each other. But this is expected because contexts in which such laws are applicable are different and hence my request to you would be to not reject contradictory mental models altogether, but interpret and apply them in depending on what context you are dealing with.
You may wonder where do these mental models come from? Is it from my experience? Or is there a more objective basis of them? A successful entrepreneur needs to understand what motivates humans and only then can she sell to customers, raise money from investors, and build a driven team. So, the laws of business are ultimately the laws of human behavior. Since human behavior is shaped by millions of years of evolution, we’re able to derive generic principles that more or less hold true in a variety of contexts. For example, evolution has shaped us to be skeptical of offers from strangers because our ancestors who weren’t skeptical were taken advantage of by others and as a result were less successful reproduction-wise as compared to the skeptical ones. So, skepticism is ingrained in us and an entrepreneur needs to understand how this deep instinct gives rise to all sorts of timeless principles such as people requiring social proof, the importance of early influencers in product adoption, and the necessity of face to face sales interactions for expensive products.
Ultimately, most of the mental models in the book are a result of one or more behavioral patterns of humans that are broadly true. However, human behavior isn’t an exact science like particle physics and hence you’ll always find counterexamples to such general patterns. A single counter-example is sufficient in physics to falsify a theory but it doesn’t work that way in social science where a counter-example does not negate a broad principle, rather it illuminates the context in which such a mental model shouldn’t be applied. So do not reject a particular mental model if your past experience doesn’t fit with it.
Who is this book written for? The primary audience of this book is someone who wants to start a company or someone who is in the early stages of doing so. Growth and later-stage entrepreneurs may also benefit from it as their experience will help them internalize the mental models in a much deeper way.
Read the book slowly, reflecting on each mental model with whatever relevant experiences you can recall from your own life. Also, my recommendation is to re-read the book at different stages of your startup journey. Each time you read, you’ll find yourself understanding the same mental models in a more illuminating light than previous instances because you’ll have more examples from your own life that you can match with various mental models.
Finally, I can’t help but mention the role of luck in business and startups. No matter how smart you are and how much you know, startup success isn’t algorithmic. You may do everything right by the book and yet fail. This is because for a startup to succeed, many things have to go right simultaneously and because the world is so large and complex, there’s always a big chunk of variables that are beyond an entrepreneur’s control. That’s why a big part of startup success depends on luck. But, unlike what many think, luck is partly manipulable. The more often you try, the better your odds of success. Also, experience and skills accumulate with each try so subsequent attempts have higher odds than the previous ones. Before my current company succeeded, I failed three times. So you can either say I got lucky the fourth time, or you can say I didn’t give up until I succeeded. Either way, the fact is that eventually things did work out for me and I hope things eventually work out for you as well.
That’s it for the introduction.
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