How well the market is aware of the problem you solve determines nearly everything that a startup does.

As a founder, I never had this kind of clarity. But I do now, and wanted to share it with you.

The Level of Problem Awareness in the market is a major hinge for startup execution. It impacts a startup’s go-to-market strategy, how you message, and also, what you fundraise. Let’s dive in.

Let’s contrast two different Tundra Angels portfolio companies that I spoke to in the last week.

The first startup is doing something revolutionary. But, it is slower moving. Most of the execution of the company is about messaging is around educating the market and raising awareness for the problem it solves and for the solution that it has.

It many ways, this execution feels like continually pushing the boulder uphill. 🪨

The second startup has a different motion. The movement of this startup is marked by quickness and velocity. One of our investors recently commented that for this startup, “Product-market fit looks unusually strong. Demand seems like genuine customer pull, not output of aggressive sales. Growth is driven by a real and growing problem. Low churn, strong inbound, and the competitive win rates they're reporting all point to a product customers actively want, not one they have to be talked into.”

This second startup execution feels like catching the water flowing downhill. 💧

Q: Now, what is the singular, first-princicples difference about these two startups?

A: It has nothing to do with the startups themselves, but rather the level of problem awareness that the market has.

✅ The level of problem awareness in the market implies how the startup should do outreach to the market.

This then affects how quickly the startup can gain customer revenue, which implies the capital that the startup needs for the opportunity. ✅

There are five levels of problem awareness in the market:

To build onto this,

✅ A startup is either doing two major things with their outreach. They are either:

But when do you educate, and when do you close?

It all depends on where the market and prospect sits on the Levels of 1-5. ✅

In Levels 1-2, the market is either unaware of the problem or unaware of what a solution could be, so education is required. In this case, the startup is creating demand. They are educating on the problem and what the solution could look like and making the prospect dissatisfied with the status quo, creating demand.

In Levels 3-5, the market is now aware of the problem and is actively searching for a solution or the best solution, so selling and closing is required. In this case, the startup is capturing demand. The work of educating on the problem or solution has already been done, either by macro-factors or other startups in the space. So the startup needs to capture the demand that exists.

In sum:

Creating Demand = Educating

Capturing Demand = Selling and Closing 

The Level of Problem Awareness can be sensed on a market level, but it is truly accurate on an individual level.

If I observe one major common flaw in startups’ customer acquistion and GTM strategy, it’s this:

✅ Startups misfire by trying to sell and close prospects that need to be educated, or by educating those who want to be closed. ✅

This is one major reason why outbound at scale is so difficult. Because if given a lead list of say, 698 names, emails, and titles, how does one customize the message for each individual’s Level of Problem Awareness?

The startup can make a hypothesis if their message should be education or closing focused based on the sense of the market. Generally speaking, it is difficult to ascertain without proprietary insight or knowledge what level of problem awareness that one single prospect has.

And that’s frustrating.

This is why the VP of Engineering prospect that you have been targeting has a hair on fire problem and wants to buy your product now but the CEO doesn’t see it as a strategic priority - two very different levels of problem awareness.

So, startup founders must sense the prospect’s awareness of the problem, but not lead the prospect to the answer. What I'd recommend doing is asking broad questions that hit the surface of the ice but don't break through it. Let the prospect give you the answer. Some questions could be:

Their answer will be your signal that flags which type of message should come next.

But importantly, all of this doesn’t stop there. The level of problem awareness affects the capital required for the opportunity.

For a prospect to move from Level 1 to Level 5, it requires time for the prospect to move from being educated to being sold to and closed.

The creating or capturing demand motions fundamentally affects how quickly the startup will score customer revenue and earn cash to fund the business. This, speed (or slowness), affects the capital that the startup needs to raise to seize the opportunity.

If a startup is doing a lot of educating about the product, sales come slower. They need to rely on more investor capital to endure the time lag for the market actors to catch on and become aware enough to buy.

✅ A founder should be always keeping a pulse on cash, relative to the cash it believes is required to move the prospect down the levels of problem awareness. ✅

In this article, I want to be very clear on what I'm not saying.

Creating demand markets are my favorite type of market.

Because when that boulder is pushed uphill to the right spot, the water starts flowing rapidly, and that startup is the only one underneath to catch the water.

I think it is in these markets that the opportunity for defensibility is greatest. Tundra Angels has invested in many startups that I would consider to be in creating demand markets and many of those companies will go on to do great things.

I believe that it is in creating demand markets where the likelihood and opportunity is highest for startups to asymmetrically win.

All I am simply saying is if your startup is in market where you are creating demand, be extremely aware of how that education motion affects your cash implications. Simply put, a startup can only survive a market where they are creating demand with capital resources. If necessary, take appropriate moves to move to a market where customers can be sold to and captured more easily.

Sometimes, you just need to go out there and capture customers, especially if survival depends on it.

We talked about the implications for the Go To Market Strategy and the outbound message. But for the fundraise itself, the fundamental question is - in your capital plan, are you factoring in the time frame needed to educate the market from Level 1 to Level 5?

I would argue that nearly every single one of fundraising plans and pro-formas that I see make the fundamental assumption that they can just go out and close the customer.

They do not pad education time in at all.

Don’t be duped.

I have never explicitly heard anybody tie the level of problem awareness in the market to the capital required to execute on the opportunity.

But after today's article, I hope that I convinced you that the level of problem awareness is of utmost importance to a startup’s execution.

One of the underappreciated skills is for founders to become a Problem Awareness sensei, as it drives many other things that a startup does.

So… sense the problem awareness, Sensei. That will help you know whether you should push the boulder… or catch the water.

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