Why Most Entrepreneurs Start with the Wrong Question
Here’s a question I ask every aspiring entrepreneur I meet: Why do you want to start your own business?
The answers are almost always the same: “To make more money.” “To escape my soul-crushing job.” “To achieve financial freedom.” Occasionally, someone surprises me with “To help people” or “To solve problems.”
But here’s what Uri Levine, the founder of Waze (sold to Google for $1.15 billion), wants you to know: if you’re starting with any answer that begins with “I want” or “I need,” you’ve already lost the game.
In his book Fall in Love with the Problem, Not the Solution, Levine shares a counterintuitive truth that separates successful founders from the 75% of venture-backed startups that fail: Your problem is more important than your solution. Always.
This isn’t just motivational fluff from a guy who got lucky once. Levine has launched multiple successful startups—FairFly, Pontera, Refundit, and Moovit (acquired by Intel)—and every single one began the same way: with a frustration he couldn’t shake and a problem worth solving.
The Genesis of a Billion-Dollar Idea: One Traffic Jam Too Many
Let me tell you how Waze started, because it perfectly illustrates what falling in love with a problem actually looks like.
September 2006. Rosh Hashanah vacation in Metula, a tiny town in northern Israel, 120 miles from Tel Aviv. Uri Levine and his extended family—ten cars total—are preparing for the three-hour journey home.
The question on everyone’s mind: “Which route should we take?”
In 2006, there was no real-time traffic data. No way to know if Highway 1 or Highway 2 would be jammed. It was basically a coin flip with your time and sanity on the line.
Levine, sitting in his car with his wife and four kids (the last ones to leave, naturally), had a thought: “If only someone ahead of us could tell us which roads were jammed.”
Then it hit him. Someone was ahead of them. Nine cars full of family members, all driving home on different routes.
He started calling them up. “How’s traffic on your route? Any jams?”
That was the “Eureka!” moment. The insight that all you need is someone ahead of you on the road to tell you what’s happening. That’s what became the essence of Waze.
Notice what Levine didn’t do. He didn’t say, “I want to build a cool navigation app.” He didn’t start with the technology. He started with a problem that made him want to punch his steering wheel: traffic jams waste your time and nobody tells you about them in advance.
The Qualification Matrix: Not All Problems Are Worth Solving
Here’s where most entrepreneurs go wrong. They find a problem and immediately start building. But Levine introduces something he calls the Qualification Matrix—a framework for determining whether your problem is actually worth the years of your life you’re about to sacrifice.
Is It a BIG Problem?
Start by asking: Is this a problem that, if solved, will make the world significantly better?
If the answer is just you—if you’re the only person on the planet with this issue—don’t even bother. “It would be much cheaper to consult a shrink,” Levine jokes.
But if many people have this problem? Now you’re onto something.
Who Else Has This Problem?
Once you’ve identified that it’s not just you, go talk to those people. Understand their perception of the problem. Don’t assume everyone experiences it the same way you do.
As individuals, we’re “a sample of one.” We can’t know how widespread or urgent a problem truly is until we hear it described by multiple people from different angles.
The Problem-First Story vs. The Solution-First Story
Companies that fall in love with problems tell stories that start with: “We solve the problem of…” or even better, “We help XYZ people avoid ABC problems.”
Companies that fall in love with solutions? Their stories start with: “My company does…” or “Our system…”
Spot the difference? One is about the user. The other is about you.
When your story focuses on your users’ pain points, gaining relevance becomes infinitely easier. When it’s about your brilliant technology, you’ll spend years trying to convince people they need something they’ve lived without just fine.
Levine started FairFly because he hated leaving money on the table when airfare prices dropped after he’d purchased tickets. He started Pontera (formerly FeeX) because he felt he was paying ridiculous fees on his retirement savings. He started Engie because visiting mechanics made him feel like an idiot who was being ripped off.
Every single startup began with his frustration, validated by talking to others who shared it, and turned into a solution only after the problem was crystal clear.
The Real Journey of Startups: Spoiler Alert, It’s Not Glamorous
Before we dive into how to build a problem-first startup, let’s get brutally honest about what you’re signing up for.
What People Think Startup Journeys Look Like
Most people imagine the startup journey as a smooth upward trajectory: Launch → Traction → Growth → Success → Exit.
Clean. Linear. Inspiring Instagram content.
What Startup Journeys Actually Look Like
Ben Horowitz, one of Silicon Valley’s most successful venture capitalists (and former CEO of Opsware), was once asked: “Did you sleep well at night being CEO of a startup?”
His answer: “Oh yes. I slept like a baby. I woke up every two hours and cried.”
The real journey is a roller coaster of failures. Constant ups and downs. So frequent that Levine says if you don’t like extreme sports, maybe startups aren’t for you.
Building a startup is fundamentally a journey of failures. Not occasional setbacks—constant failure. Your job as a founder is to fail faster than your competitors so you can find what works before your funding runs out.
Thomas Edison said it best: “I have not failed 700 times. I have not failed once. I have succeeded in proving that those 700 ways will not work.”
The entrepreneurs who succeed embrace this reality. They don’t fear failure—they systematically test assumptions, discard what doesn’t work, and iterate until they discover the solution that creates actual value. They fall in love with solving problems—not building solutions—because that’s what carries them through the inevitable failures. When you’re obsessed with eliminating traffic jams because you’ve wasted hundreds of hours in them, you don’t quit after the 50th failed experiment. You find another way.
Operate in Phases: The Secret Structure of Successful Startups
Most entrepreneurs build business plans that go something like: Year 1: Launch. Year 2: 10,000 users. Year 3: 100,000 users. Year 4: $10M revenue. Year 5: Unicorn status.
It’s complete fiction.
Levine introduces a framework he calls “Operating in Phases“—the idea that successful startups go through distinct phases, each requiring about 2-3 years and a completely different focus.
The Most Important Thing (MIT)
At any given time, your startup has exactly one MIT—one Most Important Thing that determines whether you live or die.
During each phase, the MIT changes. And when it changes, everything changes:
- Your priorities
- Which team members are critical
- How you spend money
- What success looks like
Think of it like driving a manual transmission car. If you don’t depress the clutch when shifting gears, the gearbox screams in protest. Same with startups—when you shift phases, you need to readjust everything.
The Phases of a Successful Startup
Phase 1: Product-Market Fit (PMF)
This is the make-or-break phase. If you figure out PMF, you get to live. If you don’t, you will die.
PMF isn’t optional. It’s literally the difference between your startup existing in two years or disappearing into the graveyard of failed companies that never achieved it.
What PMF Actually Looks Like
Think about all the apps you use every day: Google, WhatsApp, Uber, Netflix, Facebook.
Do you use them differently today than the first time you used them? No. You search on Google today the same way you searched 20 years ago. You use Waze the same way you did the first time.
Once you figure out PMF, your product’s core value proposition doesn’t change anymore. The back-end might evolve, the business model gets added, scalability requires development—but the fundamental value creation remains the same.
How long did these companies take to find PMF?
- Waze: 3.5 years (2007-2010)
- Microsoft: 5 years (1975-1980)
- Netflix: 10 years (1998-2008)
How to Measure PMF: The Retention Test
Product-market fit is measured by one metric: retention. Not downloads. Not sign-ups. Are users coming back? That’s the only question that matters.
If users try your product once and never return, you don’t have PMF—no matter how impressive your download numbers look.
Levine’s PMF Model Funnel:
- Conversion: What percentage of people who hear about your product try it?
- First-Time Value: Do users experience value in their first session?
- Retention: Do they come back?
- Frequency: How often do they use it?
If any of these metrics are broken, you don’t have PMF.
The “Three Uses” Rule
If a user doesn’t use your product three times, they will never be retained. Why three?
- First use: Curiosity made them try
- Second use: Testing whether the first experience was real
- Third use: Forming a habit
The Journey to PMF is a Journey of Failures
The road to PMF is iterative: Build a feature → Test with users → Measure retention → Did it work? No → Remove or change it → Repeat.
Levine calls this “failing fast.” The faster you fail, the more experiments you can run within your budget and timeline.
During the PMF Phase:
- Focus ALL efforts on creating value for users
- Keep your organization lean: small team, small budget
- Every line of code should improve retention
- Don’t hire VPs of Marketing or Business Development yet—they’ll bring users to a product that’s not ready
This phase typically takes 2-4 years before you can move to the next phase.
Phase 2: Business Model
Once you’re creating value, you need to figure out how to capture some of that value as revenue.
Will you charge users directly? Sell data to third parties? Sell advertising? Subscription or one-time fee?
This typically takes another 2-3 years of experimentation.
Phase 3: Growth/Scale
Now that you have PMF and a business model, how do you acquire users at scale?
This is where marketing becomes critical. Your Chief Marketing Officer suddenly becomes your most important hire.
Growth is incredibly hard to figure out. Most startups that achieve PMF and a business model still fail to crack growth.
Phase 4-7: Globalization, Partnerships, Optimization, Exit
These later phases can happen in different orders or simultaneously, depending on your business. But each requires shifting your MIT and potentially reshuffling your team.
Why You Can’t Skip Phases
Can you figure out scale before PMF? No. Imagine bringing millions of users to a product that doesn’t create value—they’ll all churn.
Can you figure out a business model before PMF? Not really. Even if someone pays for your product, they’ll cancel if it doesn’t consistently deliver value.
The Danger of Hiring Too Early
One of the biggest mistakes founders make: hiring a VP of Marketing or Chief Revenue Officer during the PMF phase.
Why is this a disaster?
Because those executives will do their jobs. The VP of Business Development will sign partnerships that bring millions of users to a product that’s not ready. Those users will have a terrible experience and churn. Now you’ve burned a valuable distribution partner relationship and wasted months of effort.
Only hire the people you need for your current phase’s MIT. Everyone else is a distraction at best, destructive at worst.
Understand Fundraising: Getting the Capital You Need
Levine calls fundraising “The Dance of the One Hundred Noes.” Here’s the reality: Your job as an entrepreneur is to hear “no” over and over until you finally get a “yes.”
What Venture Capitalists Actually Want
VCs don’t invest in companies that will double their money. They want 10x, 20x, 100x returns—the “fund makers” that become billion-dollar companies.
Why such high expectations? Because 75% of VC-backed startups fail completely. VCs need massive wins to make up for all the losses. The ratio of unicorns to startups was 1:1,500 in 2014 and improved to 1:800 in 2021.
At the seed stage, VCs invest based on two factors:
- They like the CEO
- They like the story
You don’t need traction or revenue yet—just be likable and tell a compelling story about a big problem you’re solving.
How to Tell Your Story
Levine’s colleague told him a story about a friend who went skinny-dipping and encountered a shark. When he mentioned the friend pulled out a knife to stab the shark, Levine asked: “Where exactly did he pull the knife from?”
The response: “Do you want a story, or do you want facts?”
Facts make people think. Stories make people imagine and feel. If you want investors to invest, they need to feel emotionally engaged in your journey.
Building Investor Relationships
Don’t just talk to investors when you need money. Send monthly updates to every investor you’ve ever met—one page with 2-3 paragraphs and 2-3 graphs showing growth.
This creates demand. When investors reach out to you instead of the other way around, your negotiating position transforms from beggar to chooser.
Plan on 6-12 months to raise a seed round. First-time founders need time to figure out and practice their story.
Understand Firing and Hiring: Building Your Team DNA
Who you hire (and fire) will make or break your startup.
Fire Fast, Hire Slow
Levine asked a room of startup CEOs: “How many of you had a situation where the team wasn’t right?”
Every hand went up.
“When did you know?”
“Within the first month.” One CEO admitted: “Before we even started!”
If every CEO knew within a month that their team wasn’t right but didn’t act, the problem wasn’t the team—it was the CEO’s failure to make hard decisions.
After that presentation, a CEO approached Levine: “Now I know what I need to do—fire my cofounder.” The next day, he’d done it. The company thanked him: “It was about time!”
Your First Ten Hires Define Your DNA
The DNA of your company is established by your first 10-20 hires. These people set the culture, work ethic, and values.
Hire wrong early, and you’ll spend years trying to fix a broken culture. Don’t hire during the PMF phase—you don’t know what skills you need yet.
Understand Your Customers: You Are Only a Sample of One
Here’s one of the most dangerous assumptions entrepreneurs make: users think like I do.
They don’t.
Levine calls this the “sample of one” problem. As individuals, we’re excellent samples of exactly one person—ourselves. We can’t possibly understand how different users experience problems or products unless we watch them.
The Three Customer Types: Innovators, Early Adopters, and Early Majority
User segmentation isn’t just marketing fluff—it’s critical to understanding why your product isn’t gaining traction.
Innovators (2-3% of users)
These people try anything new just because it’s new. They’ll deal with bugs, weird settings, and unclear value propositions. They’re essentially beta testers who volunteered without knowing it.
Early Adopters (13-15% of users)
These folks will use your product even though it’s new because they understand the value it provides. They’re not afraid of change. They’ll overcome most issues on their own and give you feedback.
Most entrepreneurs (including you, if you’re reading this) fall into this category. And that’s the problem.
Early Majority (34% of users)
This is your biggest market—and your biggest challenge.
The early majority are afraid of change. Their state of mind is: “Don’t rock the boat.”
Before downloading your app, they were fine. If they don’t use your app, they’ll still be fine. If something doesn’t work perfectly, they’ll abandon it immediately.
They won’t explore settings. They won’t Google solutions to problems. They won’t ask for help (because they don’t want to look stupid). They hate when you release new versions with changes.
The early majority will quit faster than you think.
Why You Need to Watch Users, Not Ask Them
When Waze built their app, they included a “map-chat” feature where drivers could upload pictures and report anything. They thought it would be for reporting hazards or asking for directions.
What actually happened?
Ticket scalpers started using it to advertise: “I have two tickets for sale” with photos, and Waze would place them correctly on the map.
Illegal dealers used it: “I have good stuff to sell,” moving locations after each transaction.
Users will find far more creative uses for your features than you ever imagined. You can’t predict behavior—you can only observe it.
The Gap Between the Users You Dream Of and the Ones You Have
When you start building, you imagine your product for John and Jane Doe—average people from the early majority.
But your first users will be innovators and early adopters. That creates a massive gap.
While your product might achieve PMF for early adopters, it’s still not good enough for the early majority. And without the early majority, you won’t become a market leader.
The early majority need early adopters to guide them, tell them it’s okay to try your app, and hold their hand through setup. They need social proof before taking the leap.
This is why user retention metrics can be misleading. Your early adopter retention looks great—60-70%. But when early majority users start downloading, suddenly retention drops to 20-30%.
You haven’t gotten worse. You’re just facing a different user type with different expectations.
How to Design for the Early Majority
- Simple = Less Remove features, not add them. Every additional button or option increases friction for the early majority.
- Nobody Reads Anything Not manuals. Not instructions. Not in-app messages. If your app requires reading to understand, the early majority will quit.
- Watch First-Time Users You can only experience something for the first time once. The only way to understand that experience is to watch someone who’s never seen your product before. Do this constantly.
- Make the First Experience Like a First Kiss Steve Wozniak, in his foreword to Levine’s book, called this metaphor powerful: “You never forget your first kiss.” Your product should strike first-time users deeply and emotionally. If they forget their first experience with your app, you’ve failed.
Understand Your Business Model: How Will You Make Money?
Once you’ve figured out PMF, you need to figure out how to capture some of the value you’re creating as revenue.
Here’s the formula Levine uses:
If you create value X, you should capture 10-25% of X as revenue.
Why only 10-25%? Because if you try to capture more, customers will feel ripped off. If you capture less, you’re not building a sustainable business.
The Different Types of Business Models
1. Consumer App with Paid Model
Options include:
- One-time purchase (buy the app once)
- In-app purchases (games often use this)
- Subscription (Netflix, Spotify, newspapers)
- Pay-per-use (Uber, Airbnb)
- Freemium (basic free, premium paid)
If users are willing to pay directly, this generates the highest revenue.
2. Selling Data
When you have a free app with lots of users and high frequency of use, you can sell data derivatives to third parties.
Waze started here—free app for users, but selling traffic and map data to companies who needed it.
Moovit sells data to public transportation authorities and city planners who need to know where people are traveling.
3. Advertising
Only works if you have massive user numbers, high frequency of use, and high duration of use.
For most startups, this is the longest desert to cross because you need PMF, then growth, then scale before advertisers care about you.
Subscription vs. One-Time Fee: Which is Better?
Levine prefers subscriptions 90% of the time.
Why?
- Higher LTV (Lifetime Value): A $10/month subscription generates $120/year, far more than a $30 one-time purchase
- Recurring revenue: Makes your company more valuable and easier to fund
- Forces you to deal with PMF: With one-time sales, you might not realize you lack PMF until it’s too late. With subscriptions, if customers aren’t getting value, they cancel immediately
- Better metrics: ARR (Annual Recurring Revenue) matters more to investors than one-time revenue
How to Validate Your Pricing
The first 5-10 deals? You need to qualify them yourself.
No one else can figure out your business model for you. Not consultants. Not your co-founder. Not your investors.
You need to be there for those first deals to understand:
- Why did they buy?
- What did they almost say no to?
- What features convinced them?
- What price made them hesitate?
- When they renewed, what made them stay?
The business model journey ends when several things align:
- The story (how you explain value)
- The value (what customers actually receive)
- The renewal (customers coming back for more)
The LTV/CAC Formula
Your business model must pass this test:
LTV (Lifetime Value) ÷ CAC (Customer Acquisition Cost) > 3
If the lifetime value of a customer isn’t at least 3x what it costs to acquire them, you don’t have a sustainable business model.
Example:
- Your subscription is $5/month
- Average customer stays 4 months
- LTV = $20
- If CAC is $50, you’re losing money on every customer
- If CAC is $5, you’re in great shape and should invest heavily in acquisition
This formula tells you whether to pour fuel on the growth fire or go back to the drawing board.
Understand Business Scaling: How to Get to a Billion Users
Once you have PMF and a business model, the next phase is growth. And growth, as Levine says, is the hardest journey of all.
Very few companies successfully crack growth at scale.
The Ways to Attract Customers
1. Word of Mouth (WOM)
The holy grail. Users are so enthusiastic about your product that they tell everyone.
WOM is organic and essentially free. But you can’t manufacture it—you can only create conditions for it by building something truly remarkable.
2. Viral Growth
Different from WOM. Viral means the product spreads through usage itself.
Facebook is viral: When you sign up, you invite your friends, who sign up and invite their friends. Classic viral loop.
The key metric: Viral Coefficient. How many new users does each current user bring?
- Coefficient < 1.0: You’ll eventually plateau
- Coefficient > 1.0: You’ll grow exponentially
3. Paid Acquisition
Online ads, TV commercials, billboards—any channel where you pay to bring in users.
This is measurable and scalable, but expensive.
The key metric: CAC (Customer Acquisition Cost)
Start small. Test channels at low volume. Optimize what works. Scale what shows positive ROI.
4. Public Relations (PR)
Contrary to startup founder dreams, PR is rarely a silver bullet for user growth.
But PR is critical for establishing credibility. When people Google you and find multiple media publications instead of just your website, it completely changes perception.
PR is especially important for:
- Recruiting talent
- Convincing partners
- Attracting investors
- Building brand authority
PR is local and hyperlocal. What works in one market often doesn’t translate globally.
You’ll need a PR firm. Don’t try to DIY this—relationships with journalists and media groups are everything, and you don’t have those relationships.
How to Expand Globally
Going global isn’t just translating your app. It’s understanding that different markets have completely different behaviors, needs, and growth dynamics.
Levine’s framework for choosing which markets to enter:
1. Market Size
Start with GDP per capita. High GDP usually means people can afford to pay for your product.
2. Similarity to Your Home Market
Cultural similarities matter. If you’re from the US, Canada and UK are easier entry points than China or India.
3. Test Before Committing
Run small experiments. Don’t open an office until you’ve validated demand.
4. Boots on the Ground
Eventually, you need local teams who understand local culture. No amount of remote work replaces having people physically present in a market.
When Should You Go Global?
After you’ve figured out PMF and growth in your home market.
Going global before you have PMF means you’ll spread yourself too thin and fail everywhere instead of succeeding somewhere.
Understand Exit Strategies: When to Sell (Eventually)
While exits might seem far off for early-stage founders, understanding the endgame helps you make better decisions today.
Why Entrepreneurs Sell
Good reasons to exit:
- It’s a life-changing event for you and your team (Levine is proudest that 75% of Waze employees became millionaires)
- You’ve lost passion for the problem
- The strategic fit creates exceptional value
Bad reasons:
- Fear of competition
- Premature cash-out
- Investor pressure
The Key Question
Are you willing to commit a few more years to this journey?
If the problem still fires you up, keep building. If not, an exit might be right.
Levine’s wisdom: “There are right decisions and NO decisions.” We can’t know what would have happened on the path not taken. Waze might be worth more today if they’d kept building independently—but would it have become what it is without Google’s acquisition? We’ll never know.
For early-stage founders, focus on solving problems and achieving PMF. Exit strategies can wait.
Conclusion: The Problem is Your North Star
Let’s circle back to where we started: Why do you want to start a business?
If your answer begins with “I,” you’re starting from the wrong place.
The most successful startups begin with a problem that makes the founder so frustrated they can’t not solve it. A problem that affects millions of people. A problem that, if solved, makes the world meaningfully better.
The path from traffic jam to billion-dollar exit isn’t smooth. Ben Horowitz slept like a baby (waking up every two hours crying). But the founders who fell in love with problems—really fell in love, the kind of love that survives 100 “no’s” from investors, countless pivots, and years of uncertainty—those founders changed industries.
They didn’t build startups because they wanted financial freedom (though they got it).
They built startups because they couldn’t stand traffic jams, overpriced retirement fees, inefficient public transportation, or any of the other thousand frustrations that make modern life harder than it should be.
Find your problem. The one that makes you angry. The one that keeps you up at night. The one that affects millions of people who’ve just accepted it as “the way things are.”
Fall in love with that problem.
Then build the solution that makes it disappear.
Ready to start building your problem-first startup? Subscribe to the BullishBooks.com newsletter for more insights on entrepreneurship and business strategy. Have questions about implementing these concepts in your startup? Drop them in the comments—I respond to every comment personally!
