To follow Daniel’s lead, here are 3 tips to succeed as an entrepreneur in a crowded space:
Negate the risks: Entrepreneurs are perceived as risk takers… but I personally hate risk. Think about negating the risk of your company by starting a side hustle first, validating your idea, or taking a small step before you go all-in
Find your niche: To be successful, you don’t have to make the next Facebook or Instagram revolution. Look at AppSumo: We took the idea of Groupon, but made it for geeks. It serves a specific need for tech enthusiasts and entrepreneurs — and it’s worked. We recently hit 8 figures
Why Lemonade didn’t start as a MVP
Daniel shared 2 fascinating viewpoints during our chat:
You create real value by doing hard things
Taking the easy route will never get you where you want to be
Daniel’s company, Lemonade decided to attack a TRILLION-dollar industry. 💸💸💸
The average of the companies in the industry is OVER 100 years.
Talk about David vs. Goliath or fighting the 800 lbs gorilla. 🦍
To combat the giants in the insurance industry, Daniel thought it was too challenging to test a minimum viable product. It required more capital.
Daniel and his team took a huge gamble going all-in building a revolutionary product:
We had a pretty strong conviction that it was right and we spoke to smart people who we trusted and we found investors who are willing to gamble on the vision. But we had some sleepless nights over this. We didn't really know.
The hardest part to judge before you launch is making sure your idea works in reality.
By asking consumers how they feel, Daniel believes you’ll get obvious, self-evident feedback you’d already know.
You have to do the hard work upfront. You have to bet the company because you can't test everything.
Daniel and his team felt that with insurance the problems run deep and the only way to solve them was to build their product without testing.
(Plus, with insurance, you can’t sell anything until you have a license, so this makes it a bit harder to test your assumptions).
I don’t necessarily agree with Daniel’s point about avoiding minimum viable product launches, but it’s interesting to hear his point of view.
If I were in Daniel’s position I might have:
Asked people how they feel about their insurance company
Showed them an alternative, how much it would cost, and why it’s different
Enabled them to sign up and pre-pay for the product upon release
Both my strategy and Daniel’s strategy can work — there’s more than one road to success.
You don’t ALWAYS have to follow the traditional and well-trodden path to building a business.
How to create disruptive business in a crowded market
Before Daniel launched Lemonade, he didn’t know what he was going to do.
He started looking for an industry ripe for disruptions and innovation.
After looking at tons of options, including healthcare and other huge industries, he decided to tackle insurance:
I've seen almost no innovation in insurance. Not many sectors that measures in trillions of dollars and have been unchanged in 100 years and are so unloved.
For an entrepreneur, the combination of an unloved industry, a lack of innovation and an endlessly big market is a goldmine.
Think about it, almost everyone pays for some kind of insurance. But have you ever heard anyone say they “love” their insurance company?
Hell no. 👎
Daniel saw this as an opportunity he couldn’t let pass by.
As a trillion dollar market, there’s no shortage of insurance companies. Lemonade faced a ton of competition.
In order to make a dent in the industry, they needed to have a fresh, new approach to insurance. So he started to rethink insurance from the ground up.
In its purest form, insurance is a GREAT thing. It's helping you out in a time of need.
You crash your car… insurance pays for the damage
You drop your phone… insurance helps you get a new one
Your home is vandalized… insurance helps you pay for the damages
But as an industry it’s so unloved. Daniel began to ask, “Why?”
From the perspective of a traditional insurer, every dollar they can avoid paying you is a dollar of profit.
That makes for a PROFOUND conflict of interest between the insurance company and their customers.
In other words, the more they can avoid paying you, the more money they make, and the more they make their investors happy.
Lemonade set out to create a loveable, trusted insurance brand that doesn't have that conflict of interest at its core.