The Big Problem Your Startup Needs to Solve

I just got involved in a new project, and almost immediately, I ran into a huge problem.

It’s the daunting "chicken-and-egg problem," and while it might not sound like much, it’s a make-or-break situation for many startup models.

The chicken and egg problem arises when a product or service’s value is entirely dependent on having a user base. For instance, a new social network needs users to attract other users. A marketplace needs buyers to attract sellers and vice versa. Without an initial base of users, the platform can’t provide value, making it very challenging to attract more users.

And believe me, trying to solve this is quite a challenge.

The startup I got involved in is called House of Pitch. It’s a platform where founders can send their pitch cards to an established user base of investors and journalists to raise funds, gain press coverage, and promote their services.

I think it’s a great product, but its value crucially depends on having both parties present. We need active investors on the platform to receive and review pitches, and we also need founders to be sending pitches to those investors.

But how do you get started?

How do you attract one without having the other already? We couldn’t attract founders to our platform if there were no investors for them to pitch to!

This problem doesn’t just apply to models like mine. If you’re promoting B2B services, how can you attract clients without having previous clients to show as a case study or provide a testimonial?

This is a key problem to solve, but at the end of the day, we all need to be good problem solvers.

Let me show you how we solved ours:

Bringing on the Investors

Attracting some of the largest venture capitalists and angel investors in the world to join your beta platform isn’t the easiest task.

We started with investors because we figured it would be harder to grab their attention. Founders were more accessible on social networks and through connections, but getting investors to join seemed much more uncertain.

We not only needed to persuade them to join the platform, but we also needed to communicate enough value and provide an incentive for them to be active. If they just signed up and forgot about it, we’d have a huge backlog of ignored pitches and a bunch of very unhappy customers.

The founders came up with an idea to provide this incentive: for every pitch an investor responds to, they get $1. Regardless of whether they responded Yes or No to the pitch.

Initially, I thought this wouldn’t be enough. These investors do million-dollar deals; surely they won’t be interested in $1?

But I was wrong.

Not many platforms literally pay you to be active on them, and since the investors preferred receiving pitch cards to scrolling through their thousands of cold emails, they kept coming back. Plus, the $1 came out of the revenue we earned from the pitch, so we only had to pay it when we were paid too.

So, we had a good enough offer, and now the investors were on board. But, this would all be pointless if we had no pitches for them to review.

We needed to bring on customers, and fast.

Bringing on the Founders

Timing was now crucial.

We were bringing on investors, but we knew they’d want to see value from our platform immediately. Our plan of offering a dollar per response wouldn’t work if no one was sending out pitches.

So, we offered free credit. We handed out free pitches. In fact, when you sign up to the platform, even today you’ll have credit to make a free pitch.

I think this is perhaps the best hack for solving the chicken-and-egg problem early on.

Some founders are very against offering their product or service for free, but I think there’s no better way to lower someone’s barriers. There’s nothing for them to lose, and nothing stops you from charging later on.

This doesn’t just apply to us. If you've got a service-based business, offering your work for free initially can be a great way to build up testimonials. Showing founders the level of investors we now had on the platform, and offering them a chance to pitch to them without charge was an offer they jumped at.

Pretty soon, we had customers in, and pitches were being reviewed. Problem solved.

Now, this doesn’t mean the problem is solved forever. It's always a situation we need to keep a close eye on. If we stop bringing on new pitchers or stop providing incentives for investors, we can’t provide a valuable platform.

But, it shows that while challenging, the chicken-egg problem can be solved. It requires some creativity and a bit of luck, but it can be done!

Does your startup experience this problem? If you have any experiences to share or thoughts on our approach, I'd love to hear from you in the comments.