10 Signals You're Playing the Wrong Game

But how do you know if you’ll ever get there or not?

How do you know if you’re playing the right game in the first place vs building a zombie?

I saw this post on X from Product Hunt’s founder, Ryan Hoover:

This week’s post is about identifying the 10 signals you’re building towards a local maxima rather than a global one.

10 Signals You’re Playing the Wrong Game

Competitors Dying Doesn’t Boost Growth

If your competitors go out of business or change their strategy, or get acquihired but then shut down, that means there are a ton of customers in your niche looking for a new product to use.

If a good chunk of them don’t organically start using your product in this situation it’s a really bad sign.

They are desperate and actively looking for a new solution. They’re reading blogs and asking friends. Would blogs and friends recommend you? If not, you’ve got a problem.

A great example of this going right is Copilot.money who had a huge spike in growth after Intuit announced it was shutting down Mint.com.

Consistent Feedback You Can’t Change

Good founders talk to users. Great founders listen to them. The best founders listen to what they’re saying, and then decide what to do.

If you’re consistently getting feedback about some part of your business model or product that for whatever reason you cannot change, then you likely aren’t approaching the market from the right angle.

Regulatory & Legal Challenges

Some markets are victims of regulatory capture.

You have no way in without spending a lot of time and money getting the right person to vouch for you or, worse, having to lobby for regulation yourself.

In some cases, this cannot be overcome. Even if you play the game, bigger existing players will outspend you until you fail

This is what happened to one of Bill Gurley’s first investments as a VC.

I highly recommend watching the first ~20 minutes of this talk by Bill Gurley if you haven’t before. It’s a great primer on just how real regulatory capture is and why it harms startups. It’s funny, concerning, and so true it hurts:

Unable to Bend the Cost Curve

If your costs are growing linearly with your revenues, scaling will be much hard.

Headcount = operational complexity + fixed costs.

Both of those are challenging.

You need to find ways to bend the cost curve and gain new efficiencies as you grow.

Low Retention

We all know that if your customers are churning too quickly, you can’t build a business.

The key is realizing when churn is due to early growing pains (lack of features, etc) vs an inherent flaw in your product or approach.

The quickest way to do this is a round of 1:1 customer discovery interviews with recently churned users where you dig into their decision.

Weak Demand Response

It’s one thing if you’re not able to find potential users, that’s a big problem, too, but what if you are able to get in front of potential users and they’re deciding to not try your product?

It may mean your positioning the product incorrectly or the pricing is wrong, but it could be something deeper.

The difference here is only captured in their initial reaction, before they look deep into how it works or how much it costs.

When you tell them you have a solution to this problem they’re having, do they get excited? If not, getting them to user it will be nearly impossible.

CAC Killing Your Margins

It’s ok to keep margins low while investing in growing your startup.

…but not if the low margins are driven by high CAC.

A high CAC will lock up your capital, keep your payback period long, and grind the business to a halt.

Eventually you will hit a wall.

So if you notice your margins are tight make sure you understand what’s driving that.

You’re Personally Losing Steam

Losing steam doesn’t always mean getting burnt out in general.

It could just mean you’ve seen another opportunity that you’re more excited about and are putting more attention towards that instead.

If you’re not all in, consider getting out and onto the next thing.

Shifting Market Trends

Even if your initial insight behind the business was correct, you don’t control the world.

Shifts in customer expectations and needs happen due to macro factors. The world is never standing still.

Being right initially isn’t enough, you have to adapt. If you can’t see the path to do so with your current direction, consider a pivot.

You Know It In Your Gut

Ultimately you have to rely on your intuition as a founder.

One of my favorite tricks when I’m trying to make a big decision is to think about it very deeply and honestly outline all the pros and cons… but then not make the decision.

Instead, just walk away from it for a few days.

You’ll find yourself noticing echoes of it in the other things you come across and, after a few of these, you’ll know what to do.