Rapidly test and validate any startup idea with the 2-day Foundation Sprint

Jake Knapp and John Zeratsky are the co-creators of the Design Sprint (the famous five-day product innovation process) and authors of the bestselling book Sprint. After decades of working with over 300 startups in the earliest stages, they discovered that most startups fail not because they can’t build, but because they build the wrong thing. The very beginning of a startup is your highest-leverage moment, and most teams waste months or years by skipping a few critical early questions. Jake and John developed the Foundation Sprint to help startups validate ideas and compress months of work into just two days. *What you’ll learn:* 1. The step-by-step Foundation Sprint process that compresses three or four months of validation into two days—including templates you can use immediately 2. Why differentiation is the #1 predictor of startup success (with the 2x2 framework that you can use with your team) 3. The three fundamental questions every founder should answer before writing a line of code 4. The “note and vote” technique that eliminates groupthink and gets honest answers from your colleagues 5. The seven “magic lenses” for choosing between multiple product ideas 6. The biggest mistake engineers make when building with AI tools 7. The paradox of speed: why “building nothing first” can get you to product-market fit faster *Brought to you by:* Brex—The banking solution for startups: https://www.brex.com/product/business-account?ref_code=bmk_dp_brand1H25_ln_new_fs Paragon—Ship every SaaS integration your customers want: https://www.useparagon.com/lenny Coda—The all-in-one collaborative workspace: https://coda.io/lenny *Transcript:* https://www.lennysnewsletter.com/p/the-foundation-sprint-jake-knapp-and-john-zeratsky *My biggest takeaways (for paid newsletter subscribers):* https://www.lennysnewsletter.com/i/167485876/my-biggest-takeaways-from-this-conversation *Where to find Jake Knapp:* • X: https://twitter.com/jakek • LinkedIn: https://www.linkedin.com/in/jake-knapp/ • Website: https://jakeknapp.com/ *Where to find John Zeratsky:* • X: https://twitter.com/jazer • LinkedIn: https://www.linkedin.com/in/johnzeratsky/ • Website: https://johnzeratsky.com/ *Where to find Lenny:* • Newsletter: https://www.lennysnewsletter.com • X: https://twitter.com/lennysan • LinkedIn: https://www.linkedin.com/in/lennyrachitsky/ *In this episode, we cover:* (00:00) Introduction to Jake Knapp and John Zeratsky (04:41) Origins of the Design Sprint (11:06) The Foundation Sprint process (14:40) Phase one: The basics (16:57) Case study: Latchet (28:50) Phase two: Differentiation (36:24) The importance of differentiation (40:15) Thoughts on price differentiation (43:37) Case study: Mellow (46:04) Custom differentiators (49:30) The mini manifesto (52:02) Phase three: Approach to the project (54:50) Magic lenses activity (01:02:39) Prototyping and testing (01:10:00) Real-world examples and success stories (01:15:15) Motivation behind The Foundation Sprint (01:17:15) The outcome of the sprint: The founding hypothesis (01:19:28) The Design Sprint (01:28:19) The role of AI in prototyping (01:36:50) Final thoughts and resources *Referenced:* • Introducing the Foundation Sprint: From the creators of the Design Sprint: https://www.lennysnewsletter.com/p/introducing-the-foundation-sprint • Making time for what matters | Jake Knapp and John Zeratsky (authors of Sprint and Make Time, co-founders of Character Capital): https://www.lennysnewsletter.com/p/making-time-for-what-matters-jake • Eli Blee-Goldman on LinkedIn: https://www.linkedin.com/in/eli-blee-goldman/ • Character Capital: https://www.character.vc/ • Character Labs: https://www.character.vc/labs • Etsy: https://www.etsy.com/ • Shopify: https://www.shopify.com/ • Naming expert shares the process behind creating billion-dollar brand names like Azure, Vercel, Windsurf, Sonos, Blackberry, and Impossible Burger | David Placek (Lexicon Branding): https://www.lennysnewsletter.com/p/naming-expert-david-placek • Sonos: https://www.sonos.com/ • Vercel: https://vercel.com/ • Windsurf: https://windsurf.com/ • April Dunford on product positioning, segmentation, and optimizing your sales process: https://www.lennysnewsletter.com/p/april-dunford-on-product-positioning • Positioning: https://www.lennysnewsletter.com/p/positioning ... References continued at: https://www.lennysnewsletter.com/p/the-foundation-sprint-jake-knapp-and-john-zeratsky *Recommended books:* • Sprint: How to Solve Big Problems and Test New Ideas in Just Five Days: https://www.amazon.com/Sprint-audiobook/dp/B019R2DQIY • Make Time: How to Focus on What Matters Every Day: https://www.amazon.com/Make-Time-Focus-Matters-Every/dp/0525572422 • Click: How to Make What People Want: https://www.amazon.com/Click-Make-What-People-Want/dp/1668072114 _Production and marketing by https://penname.co/._ _For inquiries about sponsoring the podcast, email [email protected]._ Lenny may be an investor in the companies discussed.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  We would have a conversation with founders. You're saying like, gosh, I'm almost embarrassed to ask this question, but who exactly is your target customer? And three co-founders have three different answers.

• 0:09Speaker 01

  After these hundreds of teams that we've worked with, we've seen that there's one failure mode, which is they don't know what that set of basics are. Then there's this other failure mode where they never test it.

• 0:18Lenny Rachitsky?

  Let's talk about the foundation sprint. Walk us through the process. How does it start? What are the steps?

• 0:23Speaker 00

  The very beginning of your project, we recommend this kind of crazy idea that you clear your calendar. So the core team come together for 10 hours roughly and go through a sequence of activities so that we can make all of the key decisions together.

• 0:37Lenny Rachitsky?

  I think a lot of people wonder as they're hearing this is, why don't I just build something and launch it and learn?

• 0:42Speaker 01

  One phenomenon we've seen when teams are building things really quickly with AI is that the more AI-generated or assisted they are, the more generic they tend to turn out. Put yourself in a situation where you can slow down and do some hard thinking, some deep thinking about what's actually going to make your product unique. Going fast can actually slow you down in the long run.

• 1:01Lenny Rachitsky?

  Today, my guests are Jake Knapp and John Zeratsky. The framework that Jake and John share in this conversation is basically the missing manual for founders and product teams trying to refine and test their startup or product idea. It's called the foundation sprint, and it emerged out of the famous design sprint, which Jake and Jay-Z co-created, and also from working with over 300 teams building both new products at startups and also with teams at larger companies like Google, Microsoft, YouTube, Slack, Uber, and many more. They published a book with this framework at the beginning of this year called Click. And the excerpt from that book that dives into this framework is one of my most popular posts of all time and is one of the rare non-AI posts amongst the top post rankings. In this conversation, make sure to get your pencils out because we go through exactly how to execute this two-day sprint,

• 1:46Lenny Rachitsky?

  where at the end of it, you have a very clear hypothesis that your entire team is aligned around, that clarifies what you're building, who you're building for, how it differentiates from competitors, and how to quickly test it with real potential customers. The two days that you invest in this sprint might be the highest ROI days in the history of your product, and I highly encourage you to do this if you're in the process of baking an idea. If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. Also, to become an annual subscriber of my newsletter, you get a year free of a bunch of amazing products, including Bolt, Linear, Superhuman Notion, Perplexity, Granola, and more. Check it out at lennysnewsletter.com and click Bundle. With that, I bring you Jake Knapp and John Zarotsky. This episode is brought to you by Brex,

• 2:30Lenny Rachitsky?

  the financial stack used by one in every three US venture-backed startups. Brex knows that nearly 40% of startups fail because they run out of cash. So they built a banking experience that focuses on helping founders get more from every dollar. It's a stark difference from traditional banking options that leave a startup's cash sitting idle while chipping away at it with fees. To help founders protect cash and extend runway, Brex combined the best things about checking, treasury, and FDIC insurance in one powerhouse account. You can send and receive money worldwide at lightning speed. You can get 20x the standard FDIC protection through program banks, and you can earn industry-leading yield from your first dollar while still being able to access your funds anytime.

• 3:15Lenny Rachitsky?

  To learn more, check out Brex at brex.com/banking-solutions. That's B-R-E-X dot com slash banking solutions. Many of you are building AI products, which is why I'm very excited to chat with Brandon Foo, founder and CEO of Paragon. Hey, Brandon.

• 3:33Speaker 03

  Hey, Lenny. Thanks for having me.

• 3:35Lenny Rachitsky?

  So integrations have become a big deal for AI products. Why is that?

• 3:40Speaker 03

  Integrations are mission-critical for AI for two reasons. First, AI products need contacts from their customers' business data, such as Google Drive files, Slack messages, or CRM records. Second, for AI products to automate work on behalf of users, AI agents need to be able to take action across these different third-party tools.

• 3:59Lenny Rachitsky?

  So where does Paragon fit into all this?

• 4:00Speaker 03

  Well, these integrations are a pain to build, and that's why Paragon provides an embedded platform that enables engineers to ship these product integrations in just days instead of months across every use case, from rag data ingestion to agentic actions.

• 4:15Lenny Rachitsky?

  And I know from firsthand experience that maintenance is even harder than just building it for the first time.

• 4:20Speaker 03

  Exactly. We believe product teams should focus engineering efforts and competitive advantages, not integrations. That's why companies like you.com, AI21, and hundreds of others use Paragon to accelerate their integration strategy.

• 4:33Lenny Rachitsky?

  If you want to avoid wasting months of engineering on integrations that your customers need, check out Paragon at useparagon.com/leni.

• 4:45Lenny Rachitsky?

  Jake and Jay-Z, thank you so much for being here and welcome to the podcast. Hey, Lenny. Thanks for having us.

• 4:50Speaker 00

  Yeah, thanks so much for having us on again. This is always a treat.

• 4:54Lenny Rachitsky?

  This is going to be a very tactical conversation. We're going to be going through how to actually execute a foundation sprint. And the reason that I'm excited to do this is you guys shared an excerpt from your book where you initially shared this whole concept. It's called Click. You shared this in my newsletter and I was just looking at it and that excerpt, that post, is amongst the top 10 most popular post of all time in my newsletter, which is especially special because it's not an AI oriented. It's one of the few non-AI posts that are near the top 10, which just tells me how valuable this is to people and consistently has sat there. It hasn't been usurped. It just continues to climb. So I'm really excited to just have a conversation where we share actually how to do this. Let me just start with the beginning,

• 5:39Lenny Rachitsky?

  just a little backstory on how the foundation sprint came to be. I know it emerged out of the now very famous design sprint, which you guys also developed. So just give us a very brief overview of just how this came to be, this idea of this foundation sprint.

• 5:54Speaker 00

  Well, maybe I'll start by talking about the design sprint part because it is essential to understanding the foundation sprint. And the design sprint first developed, I had been working at the beginning of my career at Microsoft for a few years, went to Google, this is like 2007, 2008, 2009, and was working on the Gmail team, was working on some, you know, projects that were just executing well, delivering, shipping. But I had this other project, this side project that had been going on for three years with a couple of colleagues, was going nowhere. And it looked like their office was going to get shut down after the financial crisis. They were in Stockholm. I went there for a week. We cleared our calendars

• 6:36Speaker 00

  for a week. We created a prototype of this, this thing, because we decided, look, we're, we're never going to get anywhere. We've tried making the perfect pitch. We've tried to, you know, make the ideal PRD. We've tried to show the, the ideal design and we just, we can't, perfection is not working. We're not able to align people. We're not able to, to get sort of executive support for this thing. We couldn't convince Larry and Sergey and Eric that they should fund this thing. And in that week in Stockholm, we created a prototype instead. We decided, you know what, forget it. We're just going to build something and put it in people's hands, put it in our fellow Googlers hands. And that prototype was what became Google Meet. It was this video conferencing tool that you could use in the web browser. No big deal.

• 7:21Speaker 00

  Yeah, it was really cool. I mean, the outcome of that, that's definitely probably the most productive week I've ever had. But the thing that struck me at the time and in hindsight was wow, it was so different to clear the calendar for a week and have the entire focal point of every person on the team be, how do we create a prototype that's so real, that works so well, that people will think it's real, that they'll react like it's real, that they'll want it? And we were in survival mode. You know, we were trying to keep that office from getting shut down. But the notion that maybe you could repeat that and recreate that is what led me to create the design sprint. So for a couple of years at Google, I started running these one-week programs with teams,

• 8:04Speaker 00

  trying to go at the beginning of a project from, you know, zero to a prototype at the end that we can, that we can sort of evaluate, test. And then I went to go work at Google Ventures. So separate, one of the Alphabet companies, we're investing in startups. I meet John Zeratsky and we start running these design sprints with, well, it turned out to be over the course of five years, I don't know, a couple hundred teams, working in the early days with founders, the early days of their establishing the product for the first time, trying to build it from zero to one, or launching a new marketing campaign, a new ad campaign, some big high-risk endeavor. We'd get to work alongside them for a week and we ended up refining this process into a recipe.

• 8:49Speaker 00

  So across five days, it's map, sketch, decide, prototype and test. One big focal point for each day. So at the end of the week, you've got a tested prototype and you learn like, are we on the right track or not? And that's the, that's the design sprint. That's kind of the, you know, the prologue, the backstory to this thing. And then after a few years at Google Ventures, John and I left and eventually, together with our co-founder Eli Bly Goldman, we started our own venture firm, Character Capital. And that's kind of where the story of the foundation sprint comes in.

• 9:25Lenny Rachitsky?

  Okay, awesome. Jay-Z, anything you wanted to add?

• 9:29Speaker 01

  One of our goals, probably our biggest goal for starting our own VC firm, was that we wanted to be able to focus on just the kinds of companies and the stage of company building that was the most fun to us, but also was where we thought we could have the biggest impact. And so, you know, for us with our background as designers, that is the early days, the first couple of months or the first year or two years of building a new business. And at GV, you know, sometimes we did that, but sometimes we were working with with companies that were already well established. And when we'd come into those companies, they kind of knew what they were doing, they knew what they stood for, they knew how they were different in the market and how they were positioned. And so we could help them, you know, answer these big questions and solve these problems

• 10:13Speaker 01

  and test their prototypes with customers. But when we started investing in, you know, truly pre-seed, sometimes inception stage, you know, pre-product, pre-revenue, pre-everything companies, there was this piece missing at the beginning of that process. So we'd run design sprints and they would be helpful, but oftentimes it felt like there was, it was a foundational element of that project that we didn't quite have our hands around. And it was things like, you know, what is the problem you're solving? And who's the, who's the ideal customer? How are you different than what's in the market today? Who are your actual competitors? And there were these questions that just kept coming up again and again, that led us to say, hey, we need to create a new sprint method, something

• 10:56Speaker 01

  that is really targeted for the very beginning of these big new projects. And, and so that was what led us to create the foundation sprint at Character Capital in 2021, 2022.

• 11:08Lenny Rachitsky?

  Okay, yeah, I was wondering the timeline on this. What I love about stuff like this, like episodes like this, is you guys have done so much work and done this so many times with so many companies, so many founders, and have learned what works and doesn't work. You said hundreds of founders, hundreds of startups. Yeah. And you've just spent so many hours studying this, refining it, crafting it, and now you're just here to share all the answers. Save us so much time, just like the ROI on this is incredible for us. So I appreciate you guys doing this. Let's get into it. Let's talk about the foundation sprint. Walk us through the process. How does it start? What are the steps?

• 11:42Speaker 00

  So specifically, what we talk about with the foundation sprint is it's at the very beginning of your project. We recommend this kind of crazy idea that you clear your schedule. You clear your calendar. So the core team, this is the co-founders, if it's a startup. If it's a product team inside a larger organization, it's the, you know, it's whoever's in charge of product. It's whoever's in charge of engineering. It's whoever's in charge of design. It's whoever's in charge of marketing. It's the core leadership team. They're going to come together for, it's going to be 10 hours roughly, give or take. And during those 10 hours, we're going to go through a sequence of activities, very highly scripted sequence of activities,

• 12:23Speaker 00

  so that we can make all of the key decisions together and identify the basics of the project. What's going to differentiate us in the marketplace? And what's the best approach or implementation path? All of those together form a hypothesis. And then we recommend, so you finish, now that's your foundation sprint. You've got your founding hypothesis. Once you've got that founding hypothesis, then you're going to go and do design sprints. And we recommend you clear the calendar for two to three weeks at least, so you have the chance to be wrong about your hypothesis. And we're going to run experiments. And again, the design sprint, highly scripted, calendar clear, you know, emails off, we're just, Slack is off. We're just focused on running through the sequence of decisions, building prototypes, getting them in front of customers,

• 13:06Speaker 00

  learning about a scorecard that relates back to the founding hypothesis. So at the big picture, it's, it's going to be anywhere from 10 hours to, you know, three to four weeks. You're going to run this detailed script of activities with your team, with their calendars clear. And that's crazy, and most people won't do it. But if you do it, it confers upon you a huge advantage because now you're, you've got information. You know whether or not your product clicks with customers. And that's a, we've seen that be just such a tremendous signal for, is there going to be product market fit?

• 13:38Lenny Rachitsky?

  Okay, that was really helpful. The 10 hours, is that specifically, that's the foundation sprint time box?

• 13:43Speaker 00

  That's the foundation sprint time box, yeah. And it's give or take, right? It might, you might go fast and be done in eight. You might have a lot of conversations and have a slightly larger team and might take you 12. So we like to spread it out over two days, do two, you know, like four to six hour blocks.

• 13:57Lenny Rachitsky?

  Okay, and then the three to four weeks-ish, that's including the design sprint?

• 14:00Speaker 00

  That's the design sprint, yes.

• 14:01Lenny Rachitsky?

  Okay, awesome. Okay, this is incredible ROI on 10 hours of work. Basically, over two days, you get, have a much stronger sense of whether your idea is any good. And you can, yeah, is that a simple way to describe it? Like you just supercharge validating an idea?

• 14:19Speaker 00

  Exactly, yeah. It's a, it's a chance to, in the, in the 10 hours, it's a chance to get clarity about the core of your strategy, which is something that teams will often go months without really nailing down. And the, the three to four weeks, that's a chance to run experiments and get confidence you're, you're actually building the right thing.

• 14:41Lenny Rachitsky?

  Okay, let's talk about these two days. How does, how do you lay it out? How do you approach it? What should someone do if they want to actually try this at home?

• 14:48Speaker 00

  So there are three phases to the foundation sprint. First phase is basics, second phase is differentiation, and the third phase is the approach to the project. So again, all three of those are going to come together to create the founding hypothesis. So the first phase, the basics, as I mentioned, that's identifying who's your customer? What problem are you solving for the customer? What's the competition for solving that problem? How do they solve it today? And what are the alternatives? How else do people solve this? What are the workarounds? Those are really, almost embarrassingly, simple things to answer. But when we do this with a team and everybody's answering, you know, sort of proposing their answer to each question, we see everybody's got a different perspective.

• 15:33Speaker 00

  And then when we lock in, the decision maker on the team says, okay, it's going to be this one, it's going to be this one, it's going to be this one. Now we have clarity and confidence that that's the right way to go. So we'll move forward from the basics into differentiation and identify what are the things that can set us apart from those competitors? And we're going to use the advantages we have, we're going to use our, our insight, we're going to use our motivation, we're going to use our special capabilities. These are things, again, people are aware of these things, they're in tune to it, but we want to get super, super specific. And we'll go into an example in a second, and I think that'll make it more clear exactly what we mean. But going then from differentiation to saying, what are all of the different implementation paths we could take here?

• 16:15Speaker 00

  Let's identify what those are, put a little detail behind them, and then we have a structured path for people to take so they can weigh that decision, but move through really quickly, commit to one, have a backup plan in case you end up feeling like you need to pivot once you start sprinting on it. And all of that together is going to form this, this kind of Mad Libs sentence. If we solve this problem for this customer with this approach, we think they're going to choose it over the competitors because of differentiator one and differentiator two. And it's, it's almost silly how simple this thing is, but really powerful for founders to have that clarity about, okay, here it all is in one sentence. Now let's go, let's go test and make sure this is true.

• 16:59Lenny Rachitsky?

  Amazing. Let's look at an example. That's a really good idea. I know you brought some, some examples. You're going to do some screen sharing. You're going to pull it up. If you're watching on YouTube, you'll be able to see it. Also, if you're watching on Spotify, you can see the video. If you're on Apple, sorry. But do your best to describe what we're going to be looking at.

• 17:15Speaker 00

  Yeah, so we're going to talk about this company called Latchit first. This is the first company we'll talk about. And Latchit is a startup who was in our last group of Character Labs, and we can go into to Character Labs later on. But essentially, this is a kind of an accelerator-like program that we run at Character Capital, where we invest in a group of companies at the same time, and we run them through that process that we were just describing, where we start with a foundation sprint, and then it's going to be a sequence of three design sprints after that, so that they're, they're testing and refining that hypothesis. And so it's a great time for them. These are founders who have just started their companies. They're kind of, you know, that pre-seed, very beginning, zero stage.

• 17:59Speaker 00

  And the progress you can see in those three and a half, four weeks, it's phenomenal. So let's, let's talk about Latchit. So Latchit, a couple of co-founders, Chris and James, who were, they had left Substack. They were engineers leading up the growth team at Substack and they wanted to build a product for artisans. So if you imagine like you're a jewelry maker, you're a, you know, you're a painter, you're a woodworker and you want to sell your products outside of your immediate, you know, community, the physical place where you are, your physical location. Well, you can, you know, you can build a site on Shopify, but you still have to market it if you do that.

• 18:43Speaker 00

  You got to figure out how to reach those folks. You can put your products on Etsy, but Etsy has become quite commoditized. So you're going to be up against everybody, everywhere, and it's going to be very hard for you to build an identity there, like to build a sense of who I am, what I'm all about. And so what Chris and James thought was, you know, maybe we could use some of the techniques and methods we, we used at Substack to help people find other, you know, other newsletter writers through their community, through recommendations they make and, and help, help out artisans in that way. Wouldn't that be cool? So they were kind of at that stage. They had a few different ideas about what form that might take, what that might look like when they joined Character Labs.

• 19:26Speaker 00

  And so that's kind of the backdrop to this little quick story I'll tell.

• 19:30Speaker 01

  And there's one really important thing to emphasize about Chris and James that Jake mentioned briefly, but I think is, is worth repeating, which is that they're engineers. They are builders. Their instinct is to write code. It's to build software. And they actually told us that they were excited but nervous to come into Character Labs where we would be encouraging them not to write code right away, to take this time to clarify.

• 19:58Speaker 01

  The differentiation, the, the structure of what they're building and to validate that with customers before they went all in on building a particular approach. And I think you'll see in this example, how while they were a little hesitant to do that upfront, eventually they saw how much more valuable it was to work in this way versus just diving right into building something.

• 20:20Lenny Rachitsky?

  That's actually really helpful context. And I, speaking of the Substack recommendations feature was one of the most game changing features for me with my newsletter. So, uh, because it basically supercharged my growth. So I get why they'd be so excited about bringing this learning to other, to other ideas and to their own startups. So, uh, thank you guys for doing that. And yeah, I'm even more excited to see what they're building.

• 20:41Speaker 00

  Well, let's take a look. So the, this board here that we're looking at, this is like their Miro board. So we've got like a big template. And whether you're watching on YouTube or listening to this episode, we'll, we'll talk about at the end, how you can get access to this template, which will kind of guide you through the process. But what happens in this first step in the foundations sprint and the basics, as you said before, is that we're going through a sequence of questions. Who's the most important customer, for example, is the first question, the very first question that a team needs to answer. And as we do that, just as an important side note, we're using this tactic that we call work alone together. And specifically the note and vote is this method where everyone's in silence, you know, in this case, both Chris and James.

• 21:24Speaker 00

  But if you have a team of seven, it's all seven people be working in silence, writing down their own answers to this question. Who's the most important customer? Who are all the different kinds of customers we might consider? Writing down multiple answers. And then, once we've got those answers, the team's going to vote on those. And then one person who's designated as the decider, usually it's going to be the CEO of the startup, but it could be, in some cases, maybe it's the, you know, chief product officer, whatever, however they decide to do it. But one person's going to say, okay, this is our decision for now. And now we're going to move on. And by doing this and using silence and using structure and then having a designated decision-making process,

• 22:04Speaker 00

  we can move through a lot of conversations very quickly and save some of that energy that it requires to make decisions for the decisions that matter most. In this case, what we're really worried about on day one of our foundation sprint is differentiation. So we don't want to spend too long on the basics. Anyway, we motor through customer problem.

• 22:24Speaker 00

  The capability, the insight, the motivation that the team has, those are all advantages. And who are the competition? And we get this, this sort of one-page sheet, the basics. And it's going to have the answers to all those questions. Who's our customer? In this case artisans who want to sell online, but they sort of find tech and marketing to be hard. The problem is sales growth. You know, if we, if we jump down to the competition, their number one competitor is Shopify. But Etsy is another way people approach this, as we mentioned, but there's also, you know, in-person sales and art fairs are other ways that people try to get at this problem. And realistically, if you're delivering a solution, you need to stand out from all of those. And then there's their advantages. We talked about, you know, this, this key one.

• 23:08Speaker 00

  They built Substack's network growth features, so they know how to do this thing. So now that we've established the basics, we're going to move on to differentiation.

• 23:18Lenny Rachitsky?

  Before you do that, actually, let me ask you a question here, because I think people seeing this could think, oh, this is like, I know all this stuff. So obvious, like, like, it's like, okay, I got it. I have an idea. I don't need to do this. Where do you find people most are often surprised by something that emerges out of this? Is like one of these buckets often, wow, we, this is often not what you expected? Or is it generally a lot of surprises? What do you, what experience there?

• 23:41Speaker 00

  I think the moment where you immediately start to see value is when everyone on the team is writing down their answers to these questions. And then people put their heads up and look at what everyone else has written. And they realize, oh, that's not what I would have, that's not what I said. Or I didn't think of that one, or, you know, gosh. The actual concrete reality of going through with the team and, and being very transparent and clear about how we're making decisions too, about each of these things. When that basic sheet comes together and you see the specifics, the specifics are surprising, but it's also familiar. We look at it and say, yeah, that looks, that all looks right.

• 24:23Speaker 00

  But I'm surprised by the specifics. They're not what I would have written if I had written it down. I might've gotten two of those things, two of the, you know, six items on there.

• 24:32Lenny Rachitsky?

  And I think that's what's that's what's most surprising. And I think it's also kind of a sense of relief that like, okay, well, that's very reassuring that we have we have clarity about that and we've made it concrete.

• 24:44Speaker 01

  These activities that we do during the basics are impactful for different reasons. I think that problem can be really interesting because when teams sit down and think about it, it is often less clear than they thought that what the actual problem is like, wait, what problem do our customers really have that we're solving for them? I think competition can be sort of an aha moment when they start to think beyond just, oh, what are the other startups in this space? Like, if this is an important problem, your customer is probably already solving it somehow. It may be a workaround. It may be an alternative. It may not be a direct competitor. But if it's worth solving, they probably have some way of dealing with it today. And what is that?

• 25:28Speaker 01

  And when you zoom out and you look at that set of competitors, it can be a little scary, but it is also an important moment for teams. And then I think that advantage isn't necessarily immediately beneficial, but it becomes really valuable when the teams are looking at differentiation. Because, you know, startups can't compete with big companies on scale or on, you know, having it built in distribution advantages or having partnerships in place. So they really have to dig deep and figure out what can we do that nobody else is capable of doing? And so by taking time to sit down and do this almost unnatural act of like, wait, why are we special? And and, you know, sort of when we're able to encourage teams to really think about that,

• 26:14Speaker 01

  it sets them up really nicely for the next step, which is differentiation, ideally based on those advantages.

• 26:20Lenny Rachitsky?

  What I'm hearing is a lot of the value here is also just, uh, everyone has what the answers in their head in some way, but just seeing what everyone else is thinking and then aligning on one is is a lot of this value.

• 26:33Speaker 01

  Yeah, it's like thinking deeply and quietly about it yourself. And then seeing what everybody else comes up with when they are able to also think deeply and quietly about it. And then, you know, ideally, if they're working, you know, with us in Character Labs, having somebody who's a bit external to push them and say, like, Try harder, like dig deeper, like what really makes you special here? How are you really gonna beat OpenAI? How are you really gonna beat Google at this?

• 26:59Lenny Rachitsky?

  This whole idea of noting and voting and working in silence, such a recurring theme on this podcast of not doing brainstorms in large groups. A lot of people, like it feels like that's just dead in every way. I just had this naming expert on the podcast who names, names some of the biggest companies in the world, Pentium, PowerBook, Sonos, Vercel. And that's their approach is they, they used to do brainstorms. He's like, that doesn't work. And now they just have small teams sitting quietly in a room, working together on, on ideas and then thinking on their own. So that's such an interesting trend. Yeah. And I feel like IDEO just like created this whole, we need to brainstorm Post-its. And then everyone's like, that's not actually working. Let's stop doing that. And the other thing that I feel as you're talking through this, like what I'm feeling this is there's, for founders, there's not like a manual for starting a company.

• 27:44Lenny Rachitsky?

  You always have, it feels like this dark art of like, I guess I gotta find product market fit on this idea. It feels like this is almost a manual of the, everything you need to do to just get the basics of, is this even worth doing?

• 27:56Speaker 01

  Yeah. And, and that's why we created it because we were, we still are investing in founders who are, you know, they're, they're incredibly talented and they're smart and they have a background that is going to give them an advantage in building some particular product. But you're right, there's, there's no manual and we were just kind of solving our own problem. And, you know, we, we believe in this so much and we see the ROI as being so great that this is the first thing we do when we make an investment. You know, we invest in a company and then we run a foundation sprint with them right away. We run more foundation sprints with startups than we do design sprints at this point. And, you know, I don't think we can ever encapsulate every single thing that you need to know or that you need to do to start a company.

• 28:39Speaker 01

  But this is our, this is our best take at like what you should do in the early days to set yourself up for success and maximize the chances that you're going to reach product market fit.

• 28:52Lenny Rachitsky?

  Amazing. Okay, let's keep going. So we've done the basics. What comes next?

• 28:55Speaker 00

  Yeah, so we've done the basics and another important thing that we've accomplished while going through the sequence of activities in the basics is to boot up the right context into everyone's head so that we're ready for the main event of this first day, which is differentiation. And I still have very firmly in my mind, like I grew up with a Mac Plus computer and you'd put in, you know, the disk and the drive and you'd have to, you'd have to boot up the app that you wanted to run. That's kind of the way our brains work. Like we have limited working memory and we've got to have the right stuff in there when we're, when we're going to make a big decision, when we're going to think hard about a certain problem or question. It's important to have the right context fresh at hand.

• 29:38Speaker 00

  So the basics is really the context for thinking about differentiation. And differentiation is the heart of what we're doing in the foundation sprint. Because it goes without saying, perhaps, but we like to say it. When you are making a new product, people want to ignore it. People want to not pay attention to it. And if they do have to pay attention to it, if it gets in their face, they, they want to not try it. Because we just are all bombarded by so many things and that's never been more true than it is now. And so we have defenses up to save, to save calories in our brain. We just, we don't want to engage. It's crucial then that a product has a clear promise that it makes

• 30:21Speaker 00

  and that that promise is radically differentiated from the alternatives. And that that promise is strong enough that you'll try it and then that the product delivers on that promise. And so when we talk about differentiation, we're saying, look, we want you to be really clear on your promise, not the promise you're making to investors about this technology and what's special about the technology or what's special about the market opportunity. But with the customer at the center, we've started the basics by talking about the customer and the problem they have and the way they see the world. And we want to talk about what you're going to offer to the customer and how it's going to separate from the alternatives. And so in the end of this next phase of the foundation sprint, we're going to have a

• 31:03Speaker 00

  two by two diagram that's going to look like a business school 101 diagram. And in fact, we often refer back to this Steve Jobs iPhone introduction slide where he talks about the iPhone and he makes a joke about it. This is a business school 101 diagram, but it's really helpful to start developing your product with this clarity about this is the promise we'll make to customers at the end, and we're going to deliver on that promise because we can test and prove that in design sprints. So anyway, we start off, we talk about differentiators and we talk about classic differentiators, fast to slow, smart to not so smart, to borrow from the iPhone slide, easy to use to hard to use and so on. And we just start off and have the team, okay, let's just, let's just score those up against

• 31:47Speaker 00

  the competition, put a sticky note on those continuums showing where you think the product could be. And usually you'll do this and maybe you'll start to see, well, there are a couple of places where we can stand out on these classics. That's great. These classics are easily understandable by any, you know, any customer. We're all sort of familiar with these kinds of things. So, okay, that's great. Then we get into writing custom differentiators. So we're going to write a bunch of, you know, good things on one end, crummy opposite on the other end, and then we're going to score those. And so for the Latch It story, we'll pick up with, with Chris and James here. You know, they've written, well, we, we could be really, we could really differentiate on networked versus siloed. Our approach is networked. If you're using Shopify, you're, you're siloed, right?

• 32:31Speaker 00

  Or, or we, you know, maybe, maybe we can differentiate on painless business growth versus labor intensive business growth. So that might be the specific way we describe the promise of our product. So after evaluating a bunch of these, writing a bunch of these, voting on them quietly, you know, and then the decider is going to say, all right, I want to choose a couple of these and we're going to try them out. The teams are gonna, if you're running a foundation sprint, you're gonna try out a few differentiators. You're gonna score against your competitors. They're gonna create a scale and you're gonna say, okay, let's be honest. Let's be tough. Where do we really think we could stack up against the competitors on this differentiator? We've chosen in great detail, plotting each, each company or product one at a time. Okay. So you know, you do that for one differentiator, you do it for another.

• 33:16Speaker 00

  You do it until you feel like we've got two that are really strong. And then you make that business school 101 diagram. And so, you know, here's, here's this one for, it says lyric, they changed their name to Latchit. So I'm gonna, I'll edit that real time.

• 33:29Lenny Rachitsky?

  I love this. Real time rebrand.

• 33:31Speaker 00

  So yeah, so Latchit's, you know, up here in the top right corner. And we say, okay, look, this is a good differentiation chart because you've got this quadrant here, this quadrant here, this quadrant here, right? You've got the, so you're in the top right and you've got.

• 33:46Lenny Rachitsky?

  You gotta be in the top right.

• 33:46Speaker 00

  What's that?

• 33:47Lenny Rachitsky?

  You gotta be in the top right. Always have to be top.

• 33:49Speaker 00

  You always have to be in the top right. And if you see those other three quadrants, the, the top left, the bottom left, the bottom right, those form an L shape and we call that Loserville. So we want to, we want to have like a way of looking at the world that puts all of the competitors into Loserville. And then we want to say like, okay, if you can deliver on that and if that promise is compelling to customers. So both those things have to be true. Can you deliver on it? And do customers care and believe that that, that matters to them? If both of those things are true, you have a really compelling promise. You have the possibility of a very successful product. So now we've identified that and that's, that becomes a core of our hypothesis. Can we, is that differentiation true?

• 34:34Speaker 00

  So that's the differentiation step.

• 34:39Lenny Rachitsky?

  Before you move on to the next step, is that where you were going next? Just so I could take a.

• 34:42Speaker 00

  Yeah, yeah.

• 34:43Lenny Rachitsky?

  Okay. Follow a couple of threads. This is so awesome. There's so many, there's just so much value here. Also just a slide at the end here, folks are watching YouTube. This is like your deck slide, right? Where you show.

• 34:54Speaker 00

  Yeah.

• 34:54Lenny Rachitsky?

  Your, your competitors and how you're, you're better than them all.

• 34:57Speaker 00

  Yeah. And actually I want to jump on that for a second because. We've all seen two by two diagram, right? There's a ton of these. They're, they're all over the place. And if you're anything like me, I just ignored these. I just thought these were pretty much BS up until like, well, whenever we started putting these foundations, friends, three or four years ago. And I think the reason why usually these, these two by two diagrams feel like this is just consultant baloney. This is just like, who, you know, it's, it's because you know, maybe one person makes this chart and they do it quickly because they need it to slide for the slide deck. And the audience they're considering, maybe it's investors. And so, you know, often these describe technology or they describe the market opportunity.

• 35:42Speaker 00

  They don't talk about the customer's perspective. And the other thing is that they're, they're not proven. There's no evidence behind the fact that these are these true. So if they are, if they did happen to be about customer perspective, it's unlikely that the whole team would have weighed in on, on what those differentiators are. And it's very unlikely that we would have tested and proven that that, that that matters and that we can deliver on it. And so if you do all of those things and you do it at the beginning of the project, we think this has the potential. We've seen it. It's, it becomes this, well, this guiding light. Here's the North Star. We need to deliver on this. This is what we have to create. And that helps you make decisions all the way through your product development cycle.

• 36:23Lenny Rachitsky?

  Just to point people to justification for why differentiation is so important. There's a couple of episodes that I did that I'll point to in the show notes that just give you more context of why you need to differentiate. So I spoke of David Plastik, who is this naming expert that we just had on the podcast. He, his whole thing is when he's coming up with a name for like Sonos or Vercel or Windsor. If it's different, it has to differentiate. Yeah. And he talks about this in depth. So I'll point to that episode. If you're, and this is just like, if you're not convinced, why are we spending so much time on differentiation? Uh, also April Dunford, who's like the, I don't know, the, the, the god of, of positioning. She has differentiation is such a core part of her approach to positioning.

• 37:06Lenny Rachitsky?

  And so there's just like so much evidence to tell you that you differentiation is a really important step and element of successful companies.

• 37:13Speaker 00

  Yeah. One of the things that. I've noticed about these topics, the basics we talked about already, differentiation, this notion of you need a foundation for your project. It's a bit more under the radar for people. I think it's a bit harder for people to immediately see like, oh, we need this. We see the people who react the strongest to this and have the strongest like immediate affinity to this idea actually being, you know, startup founders, people who are really sophisticated, like in this challenge, product managers who are at, you know, we're invited in to speak at OpenAI and Anthropic about this. And we see the product people there being like, oh, my God, this is, this is really powerful. This is the kind of stuff we need. I think for a lot of folks, though, it can sound like this is just elementary, you know,

• 37:56Speaker 00

  and differentiation, of course, we need to differentiate. The problem is that all of this stuff gets backgrounded. It's, it's something we, we've thought about a bit. We assume we're on the same page. We assume we're going to deliver something, but then kind of business as usual happens. We build a product, we get kind of more interested in the technology and delivering that. And we end up trying to sell it to customers at the end. We end up putting a coat of paint on it with a marketing page or a sales deck. We haven't actually built from the beginning the thing that we know is going to matter to people.

• 38:28Lenny Rachitsky?

  One of the most useful steps here that I haven't seen before is just a starting place for how to even start thinking about differentiation. Like everyone's always probably thinking price and speed, maybe. You guys have a really cool just starting list that you showed here. Anything more you can add here for helping people start to think about wasted differentiation beyond the obvious price and speed? And I don't know, a couple more.

• 38:49Speaker 00

  So I'm just going to jump into another startup here just so we can see what this sheet looks like with scores on it. So this is a startup called Mellow. Anyway, the standard classic differentiators where we start, they are fast to slow, smart to not so smart, easy to use to hard to use, free to expensive, focused to one size fits all, simple to complicated, and integrated to siloed. And so, you know, you could probably argue there's these others that should be included or some of those should be taken off. But what we like about this is that it's a small set. They're easy to understand. We know customers can understand these.

• 39:33Speaker 00

  And they create a great starting place for your team to think about differentiation. Because you can quickly look at this list and start scoring where you think your product could be on these scales. And you know that if you can use one of these, people will understand it. But it also starts to make the team comfortable with this notion of differentiation. And again, we want to make differentiation something that all of the co-founders or all of the core team can participate in. It's not just the job of the person writing the pitch deck. It's not just the job of the marketer or the salesperson, but we're getting everybody's perspective in on it. And this is a great warm up activity before we start to write our own custom differentiators.

• 40:17Lenny Rachitsky?

  Awesome. And then again, this is just inspiration for coming up with more ways to differentiate. Something that is a common question, I think, for founders is price as a differentiator? Is there any insight you guys have there? Like, how often do you land on price being a good differentiator with the startups you work with?

• 40:33Speaker 01

  I think price is rarely the most important differentiator. Part of what's interesting about going through these classic differentiators, these standard ones first, and then jumping into the custom ones, is that the classic ones are sort of universal. But it is going to be hard to beat the competition on very many of these. Like, it's going to be hard to build a product that's faster than what Google can build or what OpenAI can build. It's going to be harder to be cheaper than those competitors because they just have so many more resources. They can have lost leader products that are that are underpriced. Where I think pricing has become a really clear advantage for some companies

• 41:14Speaker 01

  is those that are leveraging AI to solve problems that were previously unsolvable with software. So, you know, we have a company that we invested in called Bindwell. And they use AI to design precision pesticides. And we ran a foundation sprint with them right after investing. And You know, five years ago, you couldn't design pesticides with AI, right? It wasn't, it wasn't possible, right? If, if you, even if you had that idea, you wouldn't have been able to build it. And now you can. And so for them, one of the big advantages is like, yeah, these pesticides, they can be, they can be a lot cheaper because it doesn't require this like massive team of, you know, R and D chemists to tinker and experiment with

• 41:59Speaker 01

  things in the lab to try to create new pesticides. We can design them with AI. So it is, it is more often true in AI companies like that. But it's very difficult to compete on price in general. And we think we find that it is not as, it's not as durable of an advantage as some of these other things.

• 42:17Lenny Rachitsky?

  That is such a good point, uh, because historically price has been a don't, don't compete on price. Like for exactly what you said, it's not, it's hard to do long-term. It's kind of race to the bottom, especially if there's incumbents, they can price a lot lower. But with AI, that is a really often and strong differentiator. Like now do this thing like, like cursor, you basically is competing on.

• 42:37Speaker 01

  Yeah.

• 42:38Lenny Rachitsky?

  You know, you're saving engineering time and it's worth so much money to you.

• 42:42Speaker 01

  Yeah. But at the same time, like the output of the AI is probably not going to be quite as good as a human process. So it can be a little bit cheaper. Yeah, for now, but it has to be a lot cheaper. It has to be, you know, I've heard people offer 10x cheaper than the legacy sort of manual approach to solving that problem as a rule of thumb.

• 43:02Lenny Rachitsky?

  That's awesome. Okay, uh, I'll just quickly reference, there's an episode that will come out before this with Madhavon about pricing strategy. And there's a lot of discussion actually on this.

• 43:09Speaker 01

  Oh, great.

• 43:10Lenny Rachitsky?

  Especially with how to design your price with customers as you're starting a company. Also, uh, the episode with, uh, the founder of Superhuman, Rahul, he actually spent, there's a lot of cool context on how he differentiated Superhuman and it was actually very much on speed and his speed, actually. Yeah, speed was where he landed. And to your point, it was both, it was the Venn diagram of what you said. Can we do this and do people value it? And that's where his research pointed to is people really value this and they were able to achieve it.

• 43:37Speaker 01

  One of the things that's really interesting about this example here that we're looking at Mellow is that you can see that. They were not the best on all these scales. You know, it's if teams are going through and they're being really realistic about how they stack up against the competition. It's normal and natural to find that you're not going to be the best on all these differentiators. And that is really helpful for creating clarity in your positioning and in your marketing, because you're not going to show a feature checklist chart that, you know, says you're better at everything than every competitor. But if you can drive home one or two things that your customers really care about and that you can be radically better at, it's going to improve your chances of winning and finding product market fit.

• 44:22Speaker 01

  And we find that going through this process where you're not just thinking about one differentiator at a time, or you're not trying to win on all of them, but you're looking across the scale of options and you're being just really honest about where you stack up can both point you in the right direction in terms of what you will win on, but also can give you the comfort to say, hey, it's okay if we're not better than every single company on every single one of these things.

• 44:44Lenny Rachitsky?

  That's great context. That's going to make people feel a lot better, I think. Today's episode is brought to you by Coda. I personally use Coda every single day to manage my podcast and also to manage my community. It's where I put the questions that I plan to ask every guest that's coming on the podcast. It's where I put my community resources. It's how I manage my workflows. Here's how Coda can help you. Imagine starting a project at work and your vision is clear. You know exactly who's doing what and where to find the data that you need to do your part. In fact, you don't have to waste time searching for anything because everything your team needs from project trackers and OKRs to documents and spreadsheets lives in one tab, all in Coda. With Coda's collaborative all-in-one workspace, you get the flexibility of docs, the structure

• 45:28Lenny Rachitsky?

  of spreadsheets, the power of applications, and the intelligence of AI, all in one easy to organize tab. Like I mentioned earlier, I use Coda every single day and more than 50,000 teams trust Coda to keep them more aligned and focused. If you're a startup team looking to increase alignment and agility, Coda can help you move from planning to execution in record time. To try it for yourself, go to coda.io/lenny today and get six months free of the team plan for startups. That's C O D A dot I O slash Lenny to get started for free and get six months of the team plan. Coda.io slash Lenny.

• 46:05Lenny Rachitsky?

  Anything else on differentiation before we move on to the third step of designing your approach?

• 46:10Speaker 00

  I think it's worth taking a look at what it looks like when you have a bunch of sort of these custom crafted differentiators, what that might look like. Because in the case of Mellow, we've got, I don't know, there must be 25 here. And, you know, so they've written, purposeful, magical, clear, personal, provides direction, flexible, human, creative, beautiful, all kinds, and on and on. What they're trying to get at, and what we want every team to sort of think about here is, what is a new version of reality, a new lens that you can offer to your customers on the world? Because a lot of times you're building a new product, you actually have to change the way people think about what's possible and what matters to them.

• 46:53Speaker 00

  Those classics are often already well trodden ground, where other people have differentiated, they've already thought about it. But these, these new particular things that you know are possible with your technology, that you know is possible with the customer problem, the things that you believe might matter. It's really interesting to try some very fine tuned list of slight, sometimes it's a slight variation. We slightly change this wording, or the way we describe what's great about what we do. And that is the thing we think is really going to stand out. And again, you can see even on this list, that they've custom written, when we see where they score it, they're not all the way to the good end of the scale on all of them. You know, when they get honest and look through, they're like, well, actually, you know, maybe we can't deliver on this.

• 47:37Speaker 00

  But this one, we really can. And this one, we also suspect will matter to customers.

• 47:42Lenny Rachitsky?

  Where did Mellow land on the differentiators they picked? And where did Latchit land?

• 47:47Speaker 00

  Yeah, let's take a look. For Mellow, they tried out a bunch before they decided here. So they actually scored with the competitors on these scales.

• 47:57Speaker 01

  And just for context, Mellow is a tool that allows you to run very simple, very targeted, very useful AI agents for common everyday tasks like summarizing your email or cleaning up your calendar or drafting responses to messages. And one of their insights was that there's been so many AI products that have overpromised about being able to replace all humans and do anything and, you know, 10x your productivity, but so few of them have actually delivered on those promises. And so they have this insight that if they can be really focused and really human and really high quality and they can deliver on that promise of, you know,

• 48:42Speaker 01

  making your life better by offloading tedious tasks, that that's going to really click with customers.

• 48:49Lenny Rachitsky?

  That's a great context. Thank you for adding that.

• 48:51Speaker 00

  So Mellow lands on mobile first and works out of the box, if there are two differentiators. And they're trying to differentiate from Gumloop and OpenAI as a generalized tool. And Latchit, they're going to differentiate on...

• 49:10Lenny Rachitsky?

  Now, we're pulling it up. If folks aren't watching, he's pulling up the mirrorboard to show us where they landed.

• 49:15Speaker 00

  Latchit, they're going to differentiate on helps you grow and cooperative. So when they compare against Etsy, when they compare against Shopify or setting up your table at an art fair, they're going to differentiate on helps you grow and cooperative. And they think none of the competitors does both of those things well.

• 49:32Lenny Rachitsky?

  That is cool. Thank you for sharing that. And to your point, this is where they think it will work. And then the next step is actually test this in the market, which is where we go from here. So let's move on to the next step, which is the final step of the foundation sprint.

• 49:45Speaker 00

  Yeah, so closing off differentiation is a short step that is just to create some project principles that'll help you make decisions in line with that differentiation. And you know, you were just talking about superhuman and differentiating on speed. And when John and I worked at Google back in the 2000s... There was this list called 10 Things We've Found To Be True. And one of the things on that list was fast is better than slow. And what was interesting is this is a mantra that you would actually hear people using in meetings to help dictate decisions. You know, well, we're considering this approach to this view or this approach. This approach renders 12 milliseconds faster.

• 50:30Speaker 00

  That's probably going to be the one we're going to take. Because there's going to be a really compelling reason for us to not go with just the one that renders faster. Or the one that gets the user to their benefit with one less click. And this notion that you can have a decision-making guide. We think we've seen it be so useful for us in those contexts. We think, hey, this is an easy moment. You've got your differentiators kind of loaded up in your mind. Let's take a second here and just think, what's a principle? How can we turn that into a principle? So if we take a look at Latchit, you know, they've got help sellers help each other. So if they're trying to make a decision between two approaches, well, which one of these help sellers help each other? Or do the thing that makes sellers more money?

• 51:15Speaker 00

  If we're choosing between two things, let's do the one that helps make them more money. And so we then we've kind of moved on. We've got a mini manifesto, we call it, which is that differentiation chart and these principles. And the notion is this page, the basics page was just kind of the core, simple stuff you need to know about this project. The mini manifesto in one page is your decision-making guide.

• 51:39Lenny Rachitsky?

  This is so cool. And this looks like it would take a lot of work. But again, this is just a day or two of sitting around, working through this framework.

• 51:48Speaker 00

  Yeah, you'll get to this in, you know, four-ish hours with your.

• 51:52Lenny Rachitsky?

  Okay, by the end of the first day, you'll have a mini manifesto that describes how you win essentially as a company and a startup.

• 51:59Speaker 00

  Yeah, or how you believe it's going to work. And of course, we're going to test it. Yeah. Now, the next phase of the foundation sprint is locking in on the approach we're going to start with. So we'll continue the story of Latchit here to, it's easier to use an example than to describe this in the abstract. So coming into Character Labs, Latchit had sort of four approaches in mind, but they weren't sure which ones to take. So they might build an app. That's one approach they could take. They might build a sort of a newsletter platform. That's something obviously they knew how to do. They might build a Shopify plugin. That's a simple way to kind of piggyback on something people are already doing. They're right, their number one competitor is Shopify. Or they might have to build the full stack.

• 52:40Speaker 00

  And I think a big question for them was which of these and how much do we have to build before there's enough value for customers that they're actually going to adopt it? And we're actually going to get some traction and get this thing going.

• 52:51Speaker 01

  And it's important to call out here that all four of these approaches solve the same problem for the same customer. And they are all likely to differentiate from the competition in the same ways based on the unique advantages that the founders, Chris and James, bring to this company. So these are not wildly different product ideas or company ideas. These are just different approaches. You have the same destination in mind, but you say, hey, which path could we take? It's like pulling up directions on Google Maps. This one's a little faster. This one uses less fuel. This one avoids tolls. What's the right approach for us to take?

• 53:27Lenny Rachitsky?

  And I love that the work you did on that first day eliminates a lot of ideas you probably had that you would have probably spent time building and then realizing, okay, this doesn't make any sense. It's just like what everyone else has.

• 53:38Speaker 00

  Totally, totally, yeah. And we usually see teams starting projects in one of two states. And one state is the state that Latchit finds themselves in where, gosh, there's a few different ways we could do this. How do we decide? We can discuss and discuss and discuss, but that could go on forever. So that's state one. We know there are some options. And state two is we're pretty locked in on one approach already. We think we've got this figured out. In either of those cases, we think it's worth taking, again, like about four hours-ish to be really careful to lay out the options. If you think there's only one option, to sort of force yourself to think, well, what if this doesn't work? What's another alternative?

• 54:23Speaker 00

  Or is there another alternative that we have previously considered and dismissed that we should maybe reconsider just to make sure? And end with a situation where you've made a decision clearly about, okay, we've considered alternatives, this is our first choice, and you've also identified this is our backup plan. So that failure doesn't seem quite so scary when we start to run experiments and we're really able to pivot fast if, should that happen.

• 54:52Speaker 00

  So what we're going to do on the second day of the foundation sprint through this sort of third phase, which is the approach, is to identify those different paths. So for Latch It here, they've got A, B, C, and D options. We're going to color code those, and then we're going to plot them on these charts. So we've got these different lenses. We call this activity magic lenses. And the notion is, if we had a discussion about it, and we could, as investors, if we could imagine waving a magic wand and putting the perfect team of advisors in place to counsel the founders on this decision, we would love for them to have a customer expert, somebody who's just brilliant vision for the product

• 55:34Speaker 00

  and the customer experience. And they're hammering their fist on the table, saying, "The customer, the customer, the customer. Make the decision that's best for the customer." And so we'll plot those options on these axes of easy to use versus hard to use, and perfect solution to the customer problem versus, "This is just an okay solution to the customer problem." And then similarly, we want an advisor who's going to pound their fist on the table for building something cheap and fast, getting it out into the market, being pragmatic, get it out there as fast as possible. That's the pragmatic lens. We want somebody who's going to advocate for growth. What's the way to reach the most customers? Get it in people's hands as fast as possible, easy to adopt. We want somebody who's going to advocate for

• 56:16Speaker 00

  money, for the financial health of the business. So what's going to create long-term value for the customers? Where's their the biggest audience of these folks? We want to look at differentiation, which we spent the first half of the foundation sprint establishing. Well, we want to consider these approaches through that lens as well. And so what the teams will do is to plot these options on these lenses. They'll almost always create some lenses of their own, some custom lenses that matter to them. They might have one about their conviction. I think there's a humorous one for Mellow where it's like...

• 56:51Speaker 00

  Which, you know, founders like, "F, yes, exactly what I want to, what I want to build." And on the other end of the spectrum, it's like, you know, nah, just kind of the, the sort of heat of excitement that you feel. That might be a really important decision.

• 57:04Lenny Rachitsky?

  That feels really important. Like, that feels like that should be one of your, you call these the magic lenses?

• 57:08Speaker 00

  Yeah, yeah, it probably should be. It probably should be.

• 57:11Lenny Rachitsky?

  Just like, how excited are you to build this? It feels like a really important piece.

• 57:14Speaker 00

  Yeah, we saw that one in, this is the, our cohort of labs that's going on right now, and I'll bring that one, that one up for, for context.

• 57:22Lenny Rachitsky?

  If we add it, we can call it the Lenny lens.

• 57:24Speaker 00

  A Lenny lens? Yeah, that's a good idea. Yeah. So, yeah, so here it is. And you can see that Marie is more likely to swear than, than Ben, apparently, but that, it's, it's crucial, right? And many founders, they'll have different, one of the challenges is that for each founder, I think, each set of founders, there's maybe a different way that they phrase what that means, what conviction means to them. And sometimes, and maybe it's as simple as this, it's just, I just feel it, I just know. And sometimes it's a little bit more like, well, I, you know, it's, it's, it's conviction, but it's also, what's the data that we have behind it? And that's what forms my, my intuition about it.

• 58:03Lenny Rachitsky?

  Awesome. I, I, I love that lens. I love that you asterisked out. So it's not, a little bit.

• 58:08Speaker 00

  A little bit, a little, a little, just slightly concealed.

• 58:11Lenny Rachitsky?

  Slightly.

• 58:11Speaker 00

  That's the part, yeah, if you zoom in, it's, it's actually not censored. So the cool thing about this lenses thing is at the end, you've done all that, you've plotted it all out. And if you're having a conversation like that, you just have to sort of maintain in memory, what did that person say? What did that other person say? What's that conversation I had, you know, a week ago, whatever? Here it's all laid out. And sometimes you zoom out and it's honestly as simple as like, oh, hey, look, you know, the, the blue one is in the top right quadrant of almost every single lens. Like, what, what is that one? What's going on? That might just be an easy decision. Sometimes you zoom out and you say, oh, clearly like nothing wins in every lens.

• 58:54Speaker 00

  And that's actually really reassuring because then you know, there is no perfect decision. There's nothing that checks all the boxes. And that's going to help us decide because now we decide which is the most important lens, which is the most important viewpoint to take. And you can, you can actually move forward in either, either way, either situation you get in, where there's sort of consistency across all the lenses or there's not. You either pick a lens or you just pick the, the consensus winner.

• 59:24Lenny Rachitsky?

  I love that this step answers a question that's been in the back of my mind that I think a lot of people wonder as they're hearing this is just, why don't I just build something and launch it and learn and like, why am I spending all this time sitting in a room? And this is, and this to me is a big part of the answer is just like spending an hour or two thinking through, here's the ideas we have. How do they compare on the, how do they look on these magical lenses, which makes so much sense? Like, how do they just filter on what customers will love most, will help us grow the fastest, will drive the most money, things like that. Like it's such a simple, quick exercise that will save you so much time building and launching and having to spend time learning like that is weeks, days, months of work versus a couple of hours. Could save you so much of that time.

• 1:00:10Speaker 00

  And it's also the case that you start building something. It's exciting. You can move fast. It's easy to, easier and easier to see progress now with AI tools. And that act of building and starting to create something has a momentum of its own that can be hard to stop. And if you're headed in the wrong direction, you can spend a lot of time building and making progress, but it's just, if it's not progress in the right direction, it's, it's actually hurting you. And that's why we, we want people to pause and, and take this. It's really, as you said earlier, the ROI is high,

• 1:00:49Speaker 00

  but it feels very unnatural to pause when you're so excited at the beginning and ready to go to pause and say, okay, let's make sure we're taking the right path. But you know, you just imagine you're, you know, you're Gandalf, you're Frodo, you're starting off, you're trying to get to Mordor. It's a long trip. You don't want to take the wrong path. You want to take the, you know, think before you start marching through, you know, the swamps or whatever.

• 1:01:13Speaker 01

  One phenomenon we've seen when teams are building things really quickly with AI is that the more AI-generated or assisted they are, the more generic they tend to turn out, which makes sense if you think about how LLMs were developed. You know, they're all basically pre-trained on the same data. And so in this excitement and this rush to say, wow, look at how fast we can build it, you actually end up with something that is less differentiated than what already exists in the world. And then, you know, let's say you launch it and that, you know, takes longer than building sort of a clickable prototype, but you launch it because you're moving so fast. And then you get data from the people who managed to find that thing about what they did with it, but you don't get any data

• 1:01:55Speaker 01

  about what they didn't do with it. And you certainly don't get any data about the people who never found it, who never, you know, tried it. Maybe they landed on your website and they're like, blah, another like, another generic AI-generated thing. I got, that's not worth my time. And so we think it's really helpful to basically put yourself in a situation where you can slow down a little bit and do some like, some, some hard thinking, some deep thinking about what's actually going to make your product unique. And then you can switch into this mode of like, okay, great. Now let's go as fast as possible and get that out into customers' hands. But if you don't take this step first, it's actually kind of counterintuitive that going fast can actually slow you down in the long run.

• 1:02:39Lenny Rachitsky?

  Yeah, to build on that, I had this guest recently, Bob Baxley.

• 1:02:43Speaker 01

  Yeah, we know Bob.

• 1:02:44Lenny Rachitsky?

  Okay, so he has this really interesting insight. He calls, he calls it, I think he calls it the primal mark. Essentially, his feedback is wait as long as possible to start any sort of sketch or prototype, because as soon as you start drawing what you're building, it now, everything you do will be a response to that.

• 1:03:03Speaker 01

  Hmm.

• 1:03:04Lenny Rachitsky?

  And so the more time you can spend before starting to concept out the solution, the more likely you are to land on something that works.

• 1:03:11Speaker 01

  Yeah, that is super interesting and you know, it's

• 1:03:16Lenny Rachitsky?

  Counterintuitive.

• 1:03:17Speaker 01

  Yeah, and I find myself challenged to think about it in the context of the sprints that we run with founders. But I think one way to interpret that in in the work that we do is that we used to just run design sprints with with every team. Like that was our hammer and and you know, everything looked like a nail. And part of what we found so valuable about doing the foundation sprint is that it it keeps you away from ideation for just a little bit longer. And it it forces you to think about, you know, why you're unique and and the market that you're going into. Before you get to that moment of creating something that looks realistic and then maybe being a little bit locked into to that approach.

• 1:03:59Lenny Rachitsky?

  That's such a like, I love that that this emerged out of that. Like you guys are were so design sprint oriented and it's just like, cool, let's just make prototypes, design, let's make it real, let's show people. And that's like, I think where a lot of people's minds are at more and more or and maybe as a result. And then this is almost like, okay, maybe that wasn't the right approach to start. Maybe it's actually better to think a little bit of what we want to design and build before. And so just the fact that you guys spent so much of your life and time on that. And then realize this is actually potentially even more important to do is says a lot.

• 1:04:33Speaker 01

  Well, and I ideas always get distilled down to like one thing that people grab on to and they they focus on. And I think with the design sprint, it got distilled down to just build a prototype. Like just just quit messing around and build something. But you know, the reality is when you run a design sprint, it's five days and you don't build the prototype until the fourth day. Right? So you do, you do a bunch of work to figure out, you know, what is, how does our customer learn about this thing? You know, what are the different ideas that we're bringing to what our solution could look like? Which of those are the most likely to work? And only then at the end of the week are you building a prototype.

• 1:05:13Speaker 01

  But I do think that as that method has become really widely known, people just think about the, you know, let's build something. And then, once you multiply that times the the power of AI, it definitely creates this narrative that the the only way to build something new is to just create the product as quickly as possible. And that that doesn't really match our experience, you know, that doesn't really kind of fit the pattern of what we've seen working best across the few hundred companies that we've worked with.

• 1:05:44Lenny Rachitsky?

  I think this validates in some ways the role of a product manager, where a PM's job is to help the team figure out what should we be building? And are we all aligned on what we're building before we start designing and building? And so this is almost like, like this process is almost like the product requirements document of a of a company, which I think a lot of product people listening to this will feel really good about.

• 1:06:09Speaker 00

  Yeah, we see this as a great tool for product people. It's a way to give you a structure for leading your team through those decisions and a way to give the all the folks on the team, including the the person who's the the product leader, but the person who's the engineering leader, the person who's the marketing leader, the sales leader, the design leaders, the exact right opportunity to contribute and participate in forming the strategy, the exact right opportunity as we get into design sprints, following the foundation sprints, to then make it real and, you know, turn that that idea, that hypothesis about what might work into hopefully evidence that it does work.

• 1:06:54Lenny Rachitsky?

  I feel like it's actually more helpful than to engineers, like non-product people, because I think a PM, my brain would be like, I want to do this intuitively, whether they do it right or not. I think it's other functions almost that are like, no, just jump, jump straight to design, straight to prototyping. Let me ask you, like, while we're on this tangent, we're on this wild tangent out of this process, but I want to, this question has been in my mind. Because I recently had a founder on the podcast, Mayor, who built this company called Base44. He built it, sold in six months for $80 million to Wix. And this journey of that is he just had a problem he wanted to solve for himself, for his girlfriend, for a scouts program. He built it, people started using it, and he kind of evolved it from there.

• 1:07:38Lenny Rachitsky?

  And obviously, he didn't go through a process like this. Thoughts on just like, is it okay to just do that? When should someone think about, okay, I should actually set aside time to do a foundation sprint versus like, I'm just motivated to solve a problem for my friends. I'm just gonna build it, evolve it, iterate with them, kind of go from there?

• 1:07:58Speaker 00

  One of the observations from our hundreds of experiences working alongside founders in the early days of their projects and watching them make decisions and watching them try things and succeed or fail is that there are so many founders who are incredibly bright, incredibly capable. They have great insights about the market, about an opportunity. And yet, their startup does not work out. And we, there's a problem with selection bias that we, you know, we hear from the folks who, they were brilliant, they were, you know, they checked all those boxes I just described.

• 1:08:41Speaker 00

  They saw a great opportunity, they were smart, they executed well, they had courage and conviction, and they did it, and it worked out, and it was a tremendous success. And I think that the danger in thinking like, well, they didn't follow the process, so I don't need to. And, you know, that may be true, and, you know, that's, maybe, maybe you don't need it. But what we believe is, you have a better, this just increases your odds. This is a chance to get more clear on, is this a good opportunity? To get more clear on, will the thing I build click with customers? And, you know, if you've already figured out that, no, this thing's, my product is taking off, my product is working, we've actually had founders in labs who, while they started off Character Labs,

• 1:09:26Speaker 00

  and they said, you know, I started selling this thing and it's already taking off. I want to stop running experiments. And we're like, yeah, stop running experiments. You don't need to do this. If you've got product market fit, if you've got evidence that this thing is clicking and you're, you have conviction, run with it. But if you're not there, this is a great path to get you going. And if you're not sure if the thing you're going to build is going to turn into that, you know, $80 million exit in, you know, in six months. We believe this is a good chance to improve your odds.

• 1:09:58Lenny Rachitsky?

  People hearing this might be, feel like I haven't heard of any company doing this. That has become a trillion dollar IPO success. What, what would make me believe that this is the process I should follow versus just, I'm just going to do what I hear on YC, just build it, launch it, iterate, that kind of thing. What can you share to give people confidence this is the approach to take?

• 1:10:20Speaker 01

  Well, the first thing I'd say is give us some time. We're, we're pretty new to this. We started Character Labs about three years ago. We created the foundation sprint about three years ago. But more seriously, when we were creating this method, one of the things that we did was look back across all the projects we've been involved in and the ones that were really successful and we looked for patterns. And while those teams didn't have the foundation sprint, they ended up having really clear differentiation and a really clear view of what made them unique that they were able to build on. And as we ran design sprints with them, we were able to sort of test and validate against that differentiation. So we believe that this is sort of a key to success, even if those teams didn't have

• 1:11:04Speaker 01

  access to this exact same methodology.

• 1:11:07Lenny Rachitsky?

  So what I'm hearing is this is essentially like alpha in starting a company. This is a new process that companies are just starting to use. You guys are working closely with founders and it's rooted in the success of many, many, many companies that you guys were involved in early on and continue to be involved in.

• 1:11:25Speaker 00

  Yeah, it's based off of this thing we've seen again and again in the most successful projects. When we're inside the room in the early days and we're seeing people make decisions, this is what drives those decisions. It's differentiation. And so if we look back across, you know, all of the sprints that we've been a part of over the years, and John and I have been inside lots of these rooms, lots of these conversations.

• 1:11:51Lenny Rachitsky?

  And if you're not watching on YouTube, by the way, there's a cool visual that Jake is showing.

• 1:11:55Speaker 00

  Yeah, it spans across Google, Google Ventures, Character Capital. And if you're watching on YouTube, you'll see all these little white circles and each one sort of represents, you know, a company that we've seen inside of during these design sprints. And there are a lot of really great success stories in there, you know? We've had the chance to, I mentioned the story of Google Meet and being there and figuring out, what is it that's going to make this thing stand out? That was what made the project finally start to take off. And to this day is still sort of what animates it. Being inside of, you know, the early days of what became Google Photos or Google Trips and some of the early design sprints. And there are a lot of others on here. But honestly, of course, we've also seen inside a lot that didn't work out.

• 1:12:40Speaker 00

  If we looked inside the greatest hits, though, the real smash successes, we looked inside all of those, we realized that there is a common element. And that common element in all of them is differentiation, that there was clarity around, this is what we're trying to prove to customers. This is the promise we're making. And so we've been on those teams or we've worked alongside those founders who have this clear idea of differentiation. And sometimes they're not right. They run the experiments and they change it. But the thing is they're keyed into differentiation as being crucial. They're not just thinking about the product and trying to get the right shape of the product or trying to make it, you know, usable or whatever. They're really keyed in on differentiation and how do we find the right promise

• 1:13:24Speaker 00

  and deliver on that promise and express that promise to customers? So to explain a little bit quickly of what I mean by differentiation and how this is manifested in products we've seen. If you go back to the early days of Gmail in the 2000s, you know, if you had email, you were probably using Hotmail or Yahoo and it worked fine. And you didn't have to think about it. And this new product comes along and you're like, God, I'm not going to want to switch my email address. What a hassle. Who wants to do that? No one. Gmail's promise was, hey, massive storage, great search. And as we were building the product out and, you know, marketing and explaining it to people and making decisions inside the project, we had to continue to deliver on great search, great search, great search. That was, that was key to standing out.

• 1:14:09Speaker 00

  You fast forward to 2014 and we're working with this tiny company who's now competing with Gmail, who's now like sort of the market leader people are used to using in, you know, in their teams. And here's this new messaging software called Slack and they're, you know, trying to reach new customers. And gosh, switching to Slack is an even bigger hassle than switching to your email address because everybody on the team has to switch. Well, Slack says, hey, if you believe that having fun and boosting teamwork is important, it's going to be clear to you. This is a new way of looking at the world. And when they were making their decisions in their first big ad campaign, their first big marketing campaign, this was what they were trying to convey to customers. So we kind of, kind of see that from the inside. Another one, we didn't see this

• 1:14:53Speaker 00

  one from the inside, but one that we're all sort of familiar with is what happened with, with ChatGPT, you know, it goes from this trusted, I don't have to think about it, I'm going to run a Google search to, oh, wow, it's a new way of looking at the world. There's zero clicks, just tells you the answer. This thing's great.

• 1:15:08Speaker 00

  This is also something that we've seen in some of the early success stories from our own portfolio. So 2019, this company called Reclaim, going after calendar management. And, you know, most of us manage our own calendars. Most of us don't have administrators helping us out with that. And, you know, it's free, we're in control. Reclaim's argument was, hey, we can automatically, we can use AI to help you focus and automatically prioritize your calendar. And that animated enough people to take the plunge and switch and try it out, that they were able to build up an audience of, you know, tens of thousands of users and Dropbox acquired them last year.

• 1:15:46Lenny Rachitsky?

  A great answer to my question. You guys, well prepared for, for the skeptics.

• 1:15:52Speaker 01

  Part of our motivation, our selfish motivation with this foundation sprint is that, you know, now that we are investing our own money into companies and we're working with all these founders, we want them to have that same clarity on differentiation. You know, we saw how important that was to Gmail and to Slack and to all these other companies. And we want to bring that. We want to sort of give them that same advantage and help them avoid the, you know, the pitfalls that all the other unsuccessful teams and companies that we've seen have fallen into. So that's, that's kind of what we're trying to do here is bring the, the lessons from these really successful teams into, you know, any team that reads the book and runs this process.

• 1:16:33Speaker 00

  And the special sauce that John and I bring is that we're obsessed with the, the sequence of decisions that you make and how you work together with your team to make good decisions quickly. And that specificity about the, the method is something that we, we do have a lot of evidence behind it working well because of what's happened with the design sprint and with how many successful teams have, have run that. At those companies who are, you know, trillion dollar or whatever kind of giant, all, all kinds of teams run design sprints. This is that same methodology around how we work together at high velocity and high quality. And it's just brought to a, a different part of the process.

• 1:17:14Lenny Rachitsky?

  Excellent answer. Speaking of the method, we went on the world's most epic tangent. I want to bring us back. We haven't finished actually going through the process. I think we're towards the tail end of it. So let's just finish that. What else do you do? So you have this, this, uh, yeah, I guess.

• 1:17:29Speaker 00

  Yeah.

• 1:17:30Lenny Rachitsky?

  Catch us up.

• 1:17:30Speaker 00

  Let's catch up with Latchit. So as a refresher for you who forgot, Latchit are building this tool for artisans. They want to help them sell with the community networking features like you might find on Substack. And they've identified their differentiation. They've identified their approach now using magic lenses. And all of this is going to come together to create a founding hypothesis. So if we help artisans solve online sales growth with a social sales app. And then they've also got their backup plan, or we could build the full stack solution. If, if that doesn't work. We believe they're going to choose it over Shopify and Etsy because our solution is cooperative

• 1:18:12Speaker 00

  and easy to use. And in this single sentence, we've laid bare their strategy. And now they're going to try to find out, does that work?

• 1:18:21Lenny Rachitsky?

  That is so cool. So the output of the sprint is the founding hypothesis. And I love that the term hypothesis is a part of this because it's not telling you this will work. It's, this is the thing you will now test.

• 1:18:33Speaker 00

  Absolutely. And every project has at its core, every new product has at its core a hypothesis. They, there is a founding hypothesis. It's just usually not explicit. It's usually hidden and different people on the team may have different ideas about what it is. And because it's not explicit, it's very hard to interrogate it and test it and find out if the, the different variables in it, the right variables.

• 1:18:59Lenny Rachitsky?

  I'm curious, what's in that photo to the right as you're showing the YouTube?

• 1:19:02Speaker 00

  Oh, yeah. If, if you're on YouTube, this is just, we did this sprint together in person. And so on Latchett's board, you're, and you're going to see that like, here's where they wrote it out and took a photo of it and dropped it in and then later filled it out on the Miro board.

• 1:19:18Lenny Rachitsky?

  Beautiful. And it has their old name there, there.

• 1:19:20Speaker 00

  That's right. Yeah.

• 1:19:21Lenny Rachitsky?

  Can't rebrand that.

• 1:19:22Speaker 00

  Lyric, which it turns out is not the easiest for SEO. There's a lot of lyrics out there.

• 1:19:27Lenny Rachitsky?

  There's a lot of lyrics. I know some lyrics. And just to understand, is the next step, the design sprint? And that's where you actually start testing?

• 1:19:34Speaker 00

  Exactly. So we zoom out now, we see now they're going to head into a sequence of design sprints, running one after another. Each of those design sprints starts with the founding hypothesis. Then the team is going to say, okay, what are the biggest risks that, you know, that hypothesis not being true? What do we need to assess right now? Going to make a map of how customers discover the product, what that core experience looks like, and then figure out using that map, where's the, where's the key moment for assessing that risk? So for them, the biggest risk is, do people even, will these artisans even want this thing? Are they actually going to want to have a community sharing sort of sales platform? And they decide the key moment for us to test that's actually on the landing page. They figure we can prototype landing pages that describe the product

• 1:20:19Speaker 00

  and learn a lot for our first experiment, just, just with landing pages. They're going to sketch solutions. This will be familiar to anyone who's, you know, heard about design sprints. You're guessing each person sketching their own proposal for how that key moment should work. Choose the strongest of those. In this case, they choose, they're going to actually prototype three things. So they test three things head to head against each other. Fake brands for each one. So they look like three different products. And then this is a really key part. At the end of the design sprint, we've got a scorecard. And this is actually a new innovation. This is not in the sprint book.

• 1:20:53Lenny Rachitsky?

  Oh shit, here we go. New hot off the presses design sprint improvement.

• 1:20:59Speaker 00

  So this scorecard is going to break down the founding hypothesis. Hey, as we talk to each customer, was this the right person? Is the right kind of customer for us? Do they have the problem that we think they have? Was this the right approach for them? Did they choose it over the competition? They're going to test these prototypes head to head and also show people like, okay, here's Etsy. Here's Shopify. Now, out of all these five options, think about, out loud about, you know, what do you, how do you compare these? So do we believe they'd actually choose it? Did the differentiation actually work? Were those differentiators valuable and motivating to them? Does it click? So our new book is called Click and you know, the idea there is you can see when a product clicks with one person.

• 1:21:44Speaker 00

  And that's a, that's a helpful signal. Now granted, these interviews are kind of a simulation. It's not like the real world, but they're a helpful signal that we're on track for product market fit. If we see, gosh, this product just seems to be clicking with customer after customer. That's a really strong signal and that's when people start to get the confidence that it's time to build.

• 1:22:03Lenny Rachitsky?

  That's a really good term, by the way. I feel that's such a good way to describe what it feels like. It doesn't just click with them.

• 1:22:08Speaker 00

  Just kind of clicks. Yeah. And if you look across Latchett's first scorecard, there's a ton of red. It's, it's a lot of things that didn't work. And the, the conclusion at the end, in this last column, there's a conclusion. Hey, we interviewed, in this case, they interviewed four customers. Well, it looks like this is the right customer. It looks like they have this problem, but everything else kind of didn't work about the hypothesis. Approach wasn't working, differentiation wasn't working. There's so many hypotheses kind of about the prototype itself, just lots of red on here. So they sprint again.

• 1:22:41Speaker 01

  And just zooming out for a second, this is a team who just started working on this new company. And, you know, sometimes it can feel slow. We talked about it feeling slow to go through all these steps. But they're only a week in and they've already built three prototypes and they've tested those three prototypes with four real customers. And they have this super detailed scorecard of here's what's working, here's not what's not working. That's after a week. So it's interesting how what can feel slow in the hour to hour actually can really speed you up in the the weeks and months time scale.

• 1:23:16Lenny Rachitsky?

  That was such good context because I was feeling that. And to your point, most founders do not do this much testing, iterating, learning in the first few weeks of their startup.

• 1:23:26Speaker 01

  They might spend a few weeks just talking to customers without showing a prototype. And then they might spend a few months building an MVP and then they might, if, you know, maybe they're going to spend some more time talking to customers while showing them the MVP. Maybe they'll do manual onboarding, something like that. But yeah, that plays out over months and it fits with what founders tell us, you know, it's, of course, it's a subjective measure, but founders who go through this process with us, they say that they're able to accelerate three to four months of work into the three or four weeks back to back sprints that we're doing together in character labs.

• 1:23:58Lenny Rachitsky?

  Excellent context. Thanks for throwing that in there.

• 1:24:00Speaker 00

  And these conversations with customers are so much more fruitful and pointed when you've got the context of, I know exactly what my hypothesis is. And you have prototypes to show them. We have a founder in our group of startups in character labs at the moment. I'm thinking of Maruthi John, who's, uh, he comes from doing sales at Rippling and we had been talking to tons of customers while starting off the, his company. And he said, you know, I've had 50 conversations over the past month, but I learned so much more from even the first conversation when I had a hypothesis and I had a prototype or a couple of prototypes to show them. It's like night and day.

• 1:24:42Lenny Rachitsky?

  That is a great example. This all makes sense. As you guys describe it, like you're, you're actually testing something very concrete that your entire team is aligned behind and actual prototypes and you've thought about different directions. So it's, you're testing something very specific versus just generally testing at your general concept.

• 1:25:02Speaker 00

  As we go into the second design sprint for Latchit, they're making some edits to their founding hypothesis. Now they're revising a few things, making new sketches, new proposals for what this solution might look like. They've learned a lot in that first sprint. A new prototype that got a prototype that has more detail now. So they are engineers. They're starting to actually write some code and put some more detail behind the product. It's more robust. And again, they're trying to fix that positioning. Here's their scorecard. And if you're watching on YouTube, you'll be able to see it. But again, there's a lot of red here. At first blush, the scorecard is bleeding. But there are some

• 1:25:46Speaker 00

  promising signs. There's like maybe a few little sun breaks. There's some spots where some of the red has started to flip to yellow. And so if we look at the conclusion on the far right, they're starting to believe their differentiation is dialed in. And they're starting to believe that this could be the right approach. They may be able to get people to choose it to the competition, even though they haven't done it yet. So those are starting to become yellow lights on the scorecard. And now they'll take what they've learned. And now we're into the third consecutive week of design sprints. Again, they're going to sort of review that founding hypothesis. They're going to sketch. They're recruiting a new slate of customers as they do each week.

• 1:26:26Speaker 00

  A new prototype, again, more code in the prototype. It's becoming more and more robust, more realistic, as they're also adjusting the marketing and the positioning at the same time. So all of these things kind of go in concert. The product itself and the marketing are sort of one as they're, as they're moving along. And this is an extreme example.

• 1:26:47Lenny Rachitsky?

  Everything is green.

• 1:26:48Speaker 00

  Everything's green. If you can't see, every single one is green.

• 1:26:51Lenny Rachitsky?

  Oh, my God.

• 1:26:52Speaker 00

  And this is, this is extreme, but it is a pattern that we've seen.

• 1:26:56Lenny Rachitsky?

  This is real.

• 1:26:56Speaker 00

  Again and again. This is a real example.

• 1:26:58Lenny Rachitsky?

  Wow. How do I invest to get us in this round?

• 1:27:01Speaker 00

  This is great. Yes, this is pretty great.

• 1:27:03Lenny Rachitsky?

  This is great.

• 1:27:04Speaker 00

  So, um, so we see this again and again, and I, you know, I can share a couple of, uh, other boards of ones that are in progress. We're also constantly adjusting the templates so you can get to see a little bit more how the, how people will edit their, um, their founding hypothesis from sprint to sprint. So, you know, Mello, who we were talking about, here's their first prototype and, you know, here's their first scorecard. Lots of, lots of yellow for them. Maybe they're a little bit more likely to use yellow than red. And then here's the edits to their founding hypothesis after the first sprint, you know? So you can kind of see in red, they're changing, slightly changing the definition of their target customer from the first week. Slightly changing the, the problem that they're solving, slightly changing the approach, slightly changing the competition.

• 1:27:49Speaker 00

  They've dialed in, they've gotten more crisp on who are we up against? They've gotten a little bit more crisp, just a tiny tweak on what, how do we explain this to people to get them excited about it? What's the differentiation? They sprint again, they prototype again, and if we just jump down and just looking at hypotheses, they learn a bunch. And now there's another slight tweak to that founding hypothesis. And so week after week, you're learning, but you're also really able to, able to track exactly what is it that we learned? And how does that affect our, our strategy?

• 1:28:20Lenny Rachitsky?

  Okay, guys, this was incredible. I think we've, we've covered the entire process. I love that you also covered the design sprint pieces, which, uh, which isn't part of this book, but is such a core. If you, clearly these things are very, uh, connected and meant to work together. So you go from here's the thing we should be building to how to actually test it. Let me ask you before we wrap up, is there anything else that you think is really important for people to know before they start trying this process at home? And is there anything you can point them to to actually try this at home?

• 1:28:51Speaker 00

  One thing we didn't talk about, we use an example of a company who's not building an AI-first product. Latchett's building this networked community sales platform for artisans. It'd probably be interesting to look at how people use this when they are building a very technical product, when they're vibe coding prototypes. That's a question we're getting all the time. What's the influence on this of the speed with which you can build something?

• 1:29:19Lenny Rachitsky?

  That's an awesome idea. Let's definitely do that.

• 1:29:20Speaker 00

  Yeah, okay. So let's jump in here and take a look at a company, again, in our current group of labs teams, Axion Orbital it's called, and the founder, Dina J, is actually running this whole process solo, which is pretty cool, too. He's a remarkable guy. We have a couple of solo founders right now who are able to generate, you can see, just to give like a sneak peek, he's generating, when we talk about customers, all these sticky notes himself and making the decisions himself about which is the right one. But to ground us in this story, his founding hypothesis is he wants to help geospatial devs solve these sort of complex workflows with a browser-based, no-code development environment. So we'll take a look just really quickly at what his prototypes look like.

• 1:30:05Speaker 00

  And in the first week, I can show you this prototype right here, and it's a marketing page. And on this marketing page, there's a link to a video. So if I click Find out more, I'm going to see this video. And this video, you're going to kind of hear Dina J talking over it, and it's going to kind of walk through a screen share of a very rudimentary version of what this product might look like. Now, if you're watching on YouTube and you see this prototype, you might think, boy, that marketing page and the demo itself. Pretty bare bones, not the most polished looking. This is, uh, this doesn't look super compelling.

• 1:30:49Speaker 00

  So he was focusing in that first sprint on the messaging, you know, on finding those, those people who actually have that role, testing it with them. And he learned a lot. So if we, you know, sort of go back to his, his scorecard, we'll see, okay, that was, you know, that was a pretty good one. Actually a lot of green on his first scorecard, but he also felt like what he tested was, was pretty incomplete. Now, one thing that's cool here, we saw the big leap with Latchit from one week to another in terms of like their learnings and the scorecards. One of the things that's interesting here is to go from Vinay J's first prototype here to his second prototype. And it's obvious he's been able to just build a ton in, uh, in the next week. And he's using, you know, AI-based tools. He's doing a lot of work. He's also just a terrific engineer.

• 1:31:32Speaker 00

  But here we've got like a much more real looking marketing page, very detailed. And an important thing that he's done here with this is he's built out a lot and created a video of something so that the product, while not fully functional, you can see exactly how it works. So if we sort of play this video, he's created this demonstration of what it looks like when you type in a query into the engine and exactly the kinds of results you get. And by doing a combination of vibe coding, real coding, all of which is based off of, you know, pencil sketches, we can go back and see the sketches he's doing on paper to define, this is what I think needs to be in there to make this compelling, to deliver on my differentiation.

• 1:32:14Speaker 00

  And then he's using a, a product video so that the entire thing doesn't have to work fully free form. That's what it can look like when a team is building something that's, that's, you know, more AI centric, when it's a more sophisticated tool, when people are going to be curious about the, sort of the ins and outs of it.

• 1:32:32Lenny Rachitsky?

  So along those lines, where do you find people are leveraging AI most in helping them through these sprints, through either the foundation sprint or the design sprint? Is it mostly just vibe coding prototypes?

• 1:32:45Speaker 00

  That's definitely the first and biggest use of AI in sprint so far is, is in, you know, making prototypes that look more realistic faster. And, you know, it's kind of like, uh,

• 1:32:58Speaker 01

  Having an entire prototyping team on standby, right? So that you don't have to just make it yourself and sort of piece things together. But you can have, you know, a ton of people ready to jump in, make something look really realistic. But it's also really critical. We found that while you're outsourcing that prototyping work, you don't outsource the thinking. Like you don't kind of skip over the, the part where you think about, well, what is the actual copy on the website? How do I actually describe what the product is? How it's differentiated? And so it's, it's one of the reasons why doing the foundation sprint first and then doing a design sprint can really help you.

• 1:33:39Speaker 01

  And, you know, because it, it allows you to spend time working on that harder part of what it means to design and, and build a product. And then, once you have a clear view of that, then you can use AI tools to go really fast. And, you know, in this example that Jake is showing of Axion Orbital, people get really clever about which parts of this need to be real. Which parts of this can be vibe coded? Which parts of this can just be a static Figma mockup? And it's all about kind of creating a simulation, uh, something that looks realistic, that you can put in front of real customers to help you answer the, the key questions.

• 1:34:14Lenny Rachitsky?

  That's a really good point that you're making. And again, it's just a reminder, you will move faster if you slow down a little bit at the beginning. That because prototyping is so easy now and just things that look, it's so easy to make something that looks really nice and kind of it's doing what you want. But spending a little time making sure you understand what you're testing and what you want, uh, is, it becomes more important.

• 1:34:33Speaker 01

  We had a couple of teams in this current group of character labs where they jumped to vibe coding prototypes like right away, like at the very beginning. And, you know, when you, when you generate something using a, using an LLI, I'm using an AI tool, like it looks pretty real. Like it looks, you know, it looks believable. And I, so I think there's a temptation to say like, okay, like this is, this is good to go. Like it, it looks close enough that I'm just gonna. You know, show that to customers. And then what they found was like, actually, the, you know, it was so, it was super generic. Like, it didn't really describe what the product was. It didn't really describe how it was different because, you know, it was, it was generated by a model that is trained on, you know, sort of existing products. And so in that second sprint, that was when they really took a step back and said, okay,

• 1:35:18Speaker 01

  let's think through this and then shift into prototyping mode. So it's definitely helping people speed up, but we also think there's an important lesson here that while you're outsourcing prototype, prototyping, don't outsource the thinking as well.

• 1:35:32Lenny Rachitsky?

  I see you pulling something up, Jake, that might be.

• 1:35:34Speaker 00

  Yeah.

• 1:35:35Lenny Rachitsky?

  I imagine you want to show.

• 1:35:36Speaker 00

  Yeah, I think it's kind of interesting to see the sketches that went into Daminjay's prototype, the Axion Orbital prototype that we just looked at, because they are super detailed. And this is doing this level of thought where you're, you're pausing, you're being really intentional about what does the customer need to know? What needs to happen for them to find a solution to their problem on, you know, and within the product? That's a way of doing your prompt engineering. If you end up vibe coding this prototype, but you start off with a very clear plan about this is what the thing needs to look at, look like, rather than going immediately into a conversational mode where you're sort of co-designing with the LLM and going back

• 1:36:18Speaker 00

  and forth via chat conversation, this is much likelier to yield an opinionated product that makes sense, that's very clearly defined around the, the problem that you're trying to solve, the tasks that need to happen to solve that problem, and the right messaging, the right wording. It's really crisply aligned with what you know about your customers, what you know about what they care about.

• 1:36:40Lenny Rachitsky?

  That's such a good point. Again, just the concept of the primal mark is ringing in my head as you talk about this. Just as soon as you make that prototype, everything from that point is a response to that first idea versus have I actually thought the Rubitha should be? Guys, we did it. This is incredible. I think this is gonna help a lot of people think through and actually save a lot of time. Is there anything else that you want to share, leave listeners with? Maybe a last nugget or something you wanna, I don't know, just double down on to leave folks with before we wrap up?

• 1:37:10Speaker 01

  Well, one quick thing is that we've, we've shared a lot of examples in this, in this conversation. And we actually have a template, a Miro template, that folks can use if they want to run their own foundation sprint. It's the template that we use, you know, when we're working with founders, taking them through these sprints. We, we do our work in Miro, even if we're in person with them, we're usually working in Miro or maybe working on paper and then capturing it in Miro because it's, it's just such a great canvas to work on. And, and we'll make that template available. So anybody who's, who's listening or watching can, can grab that and, and use it to run their own foundation sprint.

• 1:37:47Lenny Rachitsky?

  That's amazing. You answered the question asked that I forgot to come back to. Can we give people a URL? We'll put it in the show notes, but should they, is it at your, yeah, I guess, where can folks find it?

• 1:37:57Speaker 00

  You should find it at character.vc and you can go there and we'll have, we'll have a page for you.

• 1:38:03Lenny Rachitsky?

  Okay, amazing. So easy. That is awesome. That's awesome that you guys are doing that. Obviously you could also read the book and that goes through a lot of this process, but I think the template is just like a plug and play. Let's just do this at home. Obviously if they want to go deeper, they can work with you guys, have you, it's such a win. They take money. You give them money and you help them figure out what the heck to build. What a deal. And that's also character.vc. They want to explore that.

• 1:38:28Speaker 01

  Yep.

• 1:38:29Lenny Rachitsky?

  Amazing. Okay. Is there anything else, Jake, that you wanted to share before we close up?

• 1:38:34Speaker 00

  No, just, you know, if, if you made it this far, hopefully your, your mind and heart is, is open to this idea. But we know it's a lot to ask to clear the calendar and follow these, these steps. But if John and I weren't so convinced that beginnings are essential to getting your best efforts in the hands of people and to achieving the, the things you want for your customers, we wouldn't be doing this. We wouldn't be going to all the trouble. There are simpler things we could, we could do one after.

• 1:39:07Speaker 00

  The, the kind of cool thing we've found about working in this way, though, we've, we've focused a lot on finding product market fit and building your business, getting started, getting momentum, getting alignment, all these things that tactically are important, that business-wise are important. But another part of it that's a nice side benefit that actually maybe is the most important thing of all is how close it brings you to your customers, to the people who you're building for, because you're interacting with them, you're focusing on them as you plan, and you're interacting with them on a weekly basis when you work in this way. And how close it brings teammates together in a very authentic way. We're working together on the most important things and we don't have to navigate the usual

• 1:39:51Speaker 00

  social dynamics of conversations where one person has an idea and they're pitching it. We don't have to navigate the constant context switches of the calendar that dominates our days. We're just working on the most important thing and the structure takes care of a lot of the difficulty of the process of what we should do. And we just find people come out of it with renewed motivation, renewed energy, and renewed enthusiasm around the fact that they get to work on what actually matters to them.

• 1:40:21Lenny Rachitsky?

  Yeah, and it just feels like really fun, just this part of the process, so fun. And then not having to decide how to approach it, having someone just give you, here's a framework to follow.

• 1:40:29Speaker 00

  It's like a yoga class, right? It's like, I don't know how to do yoga, but explain to me step by step.

• 1:40:35Lenny Rachitsky?

  Yoga for startups, that'll be the title of this episode. Guys, this was awesome. I'm gonna skip the lightning round just because we've gone long. And I guess just working folks finding online and how can listeners be useful to you?

• 1:40:47Speaker 00

  You can find me on LinkedIn. John, I think you can find you on LinkedIn, too.

• 1:40:51Speaker 01

  Yeah.

• 1:40:52Speaker 00

  And we'd love for people to apply to Character Labs, or if you know a founder, apply to Character Labs, get in touch with us, character.vc.

• 1:41:00Lenny Rachitsky?

  There we go. All right, guys. Thank you so much for being here and for sharing.

• 1:41:04Speaker 01

  Yeah, thanks, Lenny.

• 1:41:05Speaker 00

  Thanks, Lenny.

• 1:41:06Lenny Rachitsky?

  Bye, everyone.

• 1:41:08Lenny Rachitsky?

  Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lennyspodcast.com. See you in the next episode.