Reflections on early-stage investing as a new(ish) venture capitalist

Why distribution strategy should be part of product design

There is a symbiotic relationship between what you sell and how you sell it. Too often, founders treat their go-to-market strategy as an afterthought to product-market fit. If you haven’t identified a way to curate demand and enable the market to realize the value of your product, then you don’t really have product-market fit but rather a research project. Peter Thiel perfectly summarizes this idea in his book Zero to One:

Don’t overstate the uniqueness

The belief that one is uniquely suited to tackle a problem for which existing solutions seem deficient is ubiquitous among founders. What matters is the degree to which they’re right. To borrow a quote from Mike Maples, “Startups are bets about how the future will unfold.” The future is solely a product of the past and the catalysts of the present. Founders should demonstrate an acute understanding of what led to the current market structure and which variables might impact how it will unfold in the future.

Incremental improvements aren’t sufficient

The two primary ways in which startups innovate within an industry are product and business model, the latter which includes go-to-market strategy and all aspects of distribution. Incremental changes to either of these ensure that incumbents — which are typically better capitalized and have broader distribution — will promptly follow suit if those changes prove successful.

  • Snyk launched a security product designed for developers instead of security professionals. The result was a fundamentally different product experience and buyer persona. Incumbent players like Qualys and Rapid7 would have had to fully reinvent how they sell and to whom in order to reposition themselves against Snyk.
  • Twilio reinvented how companies embed telecommunications into their products. Instead of spending 12-plus months working with a telco like AT&T or Verizon to install an SIP trunking service and learn how to manually provision phone numbers, manage infrastructure capacity, and navigate archaic management portals, developers could simply embed telecommunications into their products with a few lines of code. For telcos to replicate this functionality, they’d have to reprice their offerings as commodities, restructure existing customer contracts, launch new product organizations, and replace or retrain their entire sales organizations. Not happening.

Product mindset = 🏆

Building a startup is an iterative process. Good product management means understanding what problem you’re solving before determining how best to solve it. Understanding what requires ongoing customer and problem discovery. The how will emerge through iteration. Beyond the product itself, how also includes how best to curate demand and enable customers to acquire the solution.

More than anything else: The team matters most

The most recurring piece of advice I received upon becoming a VC was that the team matters most. I’d nod in agreement with this advice, but my actions suggested otherwise. Upon receiving a pitch deck, I’d skim through the team slide and focus on the product, market, distribution, and so on. I’d hear about a newly formed company and then immediately study the landscape in search of an understanding of how this company might fit within it. I’d meet with a founder and scurry through introductions in favor of a discussion about — you guessed it — everything except their motivations for starting the company, who they’re bringing along on the journey, how they think about building a team, their bench of candidates they’ll attempt to hire after the financing, etc.



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