To recap, inflection points allow the startup to move from a small group of people who believe in it to a mass market amount of people who believe in it very quickly. Or, put another way, a secret shared by a small few becomes mass market consensus. In an inflection point, that shift happens VERY quickly. 

✅ Specifically, I have observed FIVE types of inflection points in startups: 

A market inflection point is when the market is of the same mind, but not of the same voice. The market unites around the voice. 

A customer inflection point occurs when a market actor with a disproportionate amount of influence on the market becomes a customer. The market unites around the influential customer. 

In a consensus inflection point, the market unites around the shareable asset and medium. 

In a product inflection point, the market unites around the ease of adopting the product.  

A product inflection point occurs when the startup designs its business model and its product SO ON POINT for the given market that it is extremely easy for customers to rapidly adopt the product. The startup greases the wheels of scalability for itself. 

Let me tell you the first time that I recognized the concept of a Product Inflection Point. I observed it in a company that Tundra Angels invested in this year, a Milwaukee-based last-mile delivery startup called Returns on Demand. The co-founders, Dustin Conrad and Scott Allen, are incredible when it comes to product experience and business model design. 

Returns on Demand pitched to Tundra Angels this Summer 2023 and we had strong interest to move them into due diligence. As part of our due diligence process, we engage with Tundra Angels members in our group who are experts in that particular industry to do a deep dive. After one due diligence conversation with the founding team, I sought feedback as I typically do from each investor. One of our investors is strategic to the space and he is an executive at a well-known logistics company in Wisconsin. I got on the phone with this investor. Admittedly, I entered the call presuming that this investor might rip it up and say why it wouldn’t work because of their industry experience. But what happened surprised me. In this investor’s words, “Returns on Demand has architected their business model and product so that they have lowered the risk on almost all of the industry failure points. It’s absolutely brilliant.” What Returns on Demand had accomplished in their product and business model was so powerful that even a veteran of 20+ years in an industry was blown away.

In other words, their offering had reached a product inflection point that allowed for minimizing downside and calibrating upside. It’s a trade-off of those factors that has allowed Returns on Demand to grease the wheels of scalability in a perfect way. 

Without going into a sensitive level of detail into the strategy and tactics, I will share at a high level what Returns on Demand does three things very well which powers their inflection point:

I first heard the “atomic unit of value” phrase from David Sacks, formerly of PayPal fame. In a podcast conversation with Mike Maples Jr., Mike asked David how PayPal was successful in the early days. David replied, “We basically surfaced the product hook on the website. Put in your email address, put in a dollar amount, and send money.” David then explained what a product hook is - “It's the atomic unit of the product… it’s the single transaction that the user will engage with, and hopefully engage with it again and again.” 

✅The critical question: What are the mission critical steps necessary to deliver the end-to-end customer experience? ✅

Returns on Demand is doing several things differently from other alternative last mile providers. In short, other startups in their industry have business models and product touch points that are secondary and tertiary to the atomic unit of value. These secondary and tertiary touch points are purely wasted effort. 

✅ In short, the surface area of your startup’s product should run up to the boundary lines of what the market actually needs. ✅

That’s why I think the PayPal example is so perfect. When you think about the fundamental transaction of value for PayPal, really, what else is necessary than an email and a dollar amount? Of course, banking account info is needed eventually. But that’s a detail that happens once the user has bought-in to the premise of sending money via email. 

Similarly, for Returns on Demand, in the words of this same Tundra Angels investor, “After spending time with the [Returns on Demand] leadership team, I like their no frills approach to solving problems.” No frills. Completely his words. No wasted product touch points. 

One of the things that impressed me in my early conversations with Dustin and Scott was how both founders detailed to me the insights they gained from a particular large-scale failed startup in their space. The founders spoke in detail about a post-mortem that they drew insights from where that startup’s founder admitted to what should have been built, rather than what the startup executed on instead. 

The insight at the core? The failed startup had executed on unnecessary product touch points that were wasted effort, or non-atomic to the customer value. 

I cannot believe that I didn’t see it earlier. 

When I was running my FinTech startup, we had a sequence in our product that required the customer to export a data set that they were not used to exporting, and import that in our product. Worse still, it required a certain column order in Microsoft Excel in order to import! 😔 The customers were used to getting streaming data on Bloomberg. 

On nearly every demo, potential customers asked us, “How do you get data into the product?” We would gleefully detail the import process, completely oblivious to the behavior change that we were requesting of each potential customer. Customers wanted the data streamed in. We didn’t have that and were requesting a shift in behavior. 

In all of this, I made a fatal flaw. I assumed that if a product was much better than the status quo, then it would overcome the gravitational pull of the current behavior and the customer would happily shift. 

Seeing hundreds of startups at this point, I have learned this: 

✅ The gravitational pull of existing customer behavior is virtually insurmountable. Do not choose to fight existing behavior. I would encourage you to not even try. 

Instead, layer an "escape velocity-level of value" product and business model onto existing customer behavior. The delta behavior change should be close to zero. ✅ 

That’s exactly what Returns on Demand has done with their business model and product experience. That only comes through intentional design and execution. And they are scaling rapidly and seamlessly across their customer base. 

I have one more example this time from Upwardli, another one of our portfolio companies. Co-Founders Aaron Gregory and Danielle Hill have designed an B2B2C embedded credit builder for consumers of money transfer companies. For the first time ever, it is possible to build credit by sending a remittance. 

At first, Aaron and Danielle started trying to attract people to their credit builder product. It was picking up some traction, but the paid media customer acquisition was going to be completely new behavior for the consumer. 

Instead of asking the consumer to do something new, Aaron and Danielle instead asked, “What is the consumer already doing that we can layer on top of?” They discovered it. Instead of creating new behavior, consumers are already sending hundreds of billions of dollars internationally via remittances. Why compete with the gravitational pull of that behavior? With that in mind, they built their product around the remittance flow. Unsurprisingly, all of these money transfer companies are rapidly adopting the Upwardli product to embed it into their remittance flow - because it’s just a layer on top of what they are already doing. 🙌

Your product can be a leverage point to move from limited awareness to mass market awareness, very quickly. 

Focus on the “atomic unit of value” for the customer, and what it isn't. 

Design the surface area of your startup’s business model and product experience to match up exactly to the boundary lines of what the market actually needs.

Lastly, your product should create close to zero net-new customer behavior. 

I hope these two examples illuminate the opportunity in front of you.