Market pull
After reviewing thousands of startups at my fund, Julian.capital, and at Carveout, I stumbled into an insight that spurred this handbook: most $1B+ tech startups fall into one of seven product categories. It appears that startups within these categories have a greater chance of succeeding.
Before I share them, let me explain why they work: they increase the chance of your startup having market pull. Market pull is when consumers reflexively want a product upon learning of it, and they’re willing to do whatever is required to get it. Market pull is the force behind "product-market fit."
In other words, when you have market pull, the market pulls the idea out of your hands at the same pace you tell people about it; you don’t slog to sell it.
Market pull is so powerful that even weak founders can ride it to $4B+ in value. Paul Graham, the founder of Y Combinator (who graduated Airbnb, Reddit, Coinbase, Instacart, Doordash, and Dropbox), remarked:
“If you wonder how someone who seems crazy or incompetent could be the CEO of a successful startup, the answer is that some startups are so viral that they'll grow (for a while at least) almost regardless of who's in charge.”
—Paul Graham
Market pull emerges when three things are true about your target audience:
Let's look at the special product categories I found within the market pull data.
The closer you align with a market pull category below, I'd argue the greater your chance of experiencing market pull today or in the future.
You don't have to restrict yourself to these, but you should understand how each works so you can borrow their tactics.
Consider what these startups have in common:
When you democratize asset classes like these startups have, investors who already believed in the asset class’ performance, but were unable to access it, rush in to invest their capital. That’s market pull. You’re giving people what they already wanted and benefiting from a high-demand, low-supply dynamic.
By empowering people to make meaningful amounts of money with little upfront work or necessary qualifications, the billions of people on this planet looking for more income consider using the product. This leads to market pull.
Softr, Webflow, and Zapier are tools that save web designers weeks or months of development work. They remove the need for coding and instead empower anyone to make websites visually—without sacrificing control and customization. For anyone used to making websites from scratch, the speed upgrade feels like magic.
Further, these companies reduce that development labor for a low cost: they cost 1/500th the price of a professional design agency or employee. So you move faster and save money—and there’s no catch.
In short, by removing a lot of work plus saving a lot of money, an equally-featured product becomes a no-brainer for anyone stuck with the alternative. This creates market pull.
In all three cases, these startups aren’t lowering the product quality—only the cost. And because consumers were already buying those product categories, switching to an equal quality alternative that’s far cheaper is a no-brainer.
For in-demand products, a significant reduction in price without a significant reduction in quality can trigger market pull. The pull is even greater if the new products are more convenient and not just cheaper, because convenience helps consumers emotionally justify the labor required to switch products.
Medium-sized price reductions are most appealing to individual consumers. Businesses, however, may be less price sensitive plus more risk averse and therefore need larger price reductions to switch to a new product.
Many big startups become replicated in other countries. For example, Yummy is the Postmates of Venezuela, Airlift is the Doordash of Pakistan, Dukaan is the Shopify of India, and so on.
By adapting $1B+ businesses to new regions, the startup has a higher-than-normal chance of succeeding because its market pull was already validated in another market.
However, the new region must meet some requirements:
If purchases in a market are manual and inefficient, you'll likely experience market pull by creating a software-run marketplace to match buyers and sellers for greater pricing transparency and more consistent supply/demand.
In pre-existing markets, buyers and sellers already interact with each other, so for a software marketplace to become a no-brainer choice, it simply needs to stabilize demand/supply and increase pricing visibility through search. And if the marketplace doesn't increase costs or friction, buyers and sellers switch over time.
Examples include Airbnb, eBay, OpenSea, and Thumbtack. New upstarts include:
Some SaaS companies grow lightning fast because their users organically invite more users. Think Slack, Asana, Zoom, WhatsApp, and PayPal.
This invitation flywheel works when users invite others to (1) send them something they’re owed (e.g. cash via Venmo or legal documents via DocuSign) or to (2) invite friends to private conversations (e.g. Zoom, Telegram, Slack).
This is called product-led acquisition and it's covered in Lesson 3, which explores how to acquire customers for your startup. (I list product-led acquisition as a pull category because it helps businesses generate market pull for themselves.)
No, but remember this criterion for market pull:
Consumers must intuitively value the product without needing an extensive explanation of it.
That's why each of the market pull categories above requires you to offer something that people badly want with immediately clear ROI.
I've overseen paid marketing for hundreds of companies, and I will tell you this with certainty: it’s hugely advantageous to pursue an idea that immediately strikes people as a no-brainer when they hear about it. In a highly competitive market, it's how you scale ads and sales without friction.
In contrast, the opposite of market pull is market push. This is where a startup has to slog to convince consumers they should want the product in the first place. Or, if consumers already want the product category but not the company’s specific product, they slog to convince consumers that the product’s benefits are worth the time, cost, and risk of switching.
This is swimming upstream, and it’s a sign that the market doesn’t want you because your idea is low ROI or that you’re early to your market. The latter doesn't mean you shouldn't start the startup, however. If you have good reason to be confident that market pull will arise in the future, you can get a headstart on the idea today.
That's worth repeating: You don't need market pull today if you're confident it'll arrive in the near future. (I talk more about market timing in the next lesson.)
If maximizing your chances of success isn’t your goal—say instead you have a social mission or an itch to scratch—then perhaps lacking market pull isn’t a concern. The purpose of this lesson is to help you stack the deck in your favor. Startups are hard, and almost all of them fail.
While browsing stories of startup failures, I came across countless quotes of founders' failure to appreciate market pull:
"This will be the number one lesson I will never forget and the absolute key to understanding Dinnr’s failure—we were not solving anyone’s problem."
—Michal Bohanes, founder of Dinnr
"EventVue was 'a vitamin instead of a painkiller.' Conference organizers typically liked our product but none of them said they needed it. It didn’t make their lives easier, make them more money or cut any of their expenses—it was just nice to have."
—Josh Fraser, cofounder of EventVue
"Personalization was not an immediate need as of that day in the app world. We failed to realize how big a problem like that was, and somehow assumed the market would see the value in the product."
—Rohit Nallapeta, founder of Eloquis
If you think you have market pull, here's one way to partially validate it:
This is an oversimplified process and it may not work for startups that have to be experienced to be appreciated, but it’s a powerful exercise for many founders.
So far we've discussed how to identify which startups might succeed, but where do we find startup ideas in the first place? That’s the bigger question I cover next.
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