Learnings from a Career as a VC
Obligatory Yay I'm a Partner at Boldstart Post :)
Today, it was announced that we’ve raised a set of new funds at boldstart ventures! You can read more below and see if you can spot the easter egg in the announcement. Thanks to our founders, LPs, co-investors, advisors, and everyone else in the boldstart network for getting us to this next milestone!
Ed Sim @edsimAnnouncing $367M in new @Boldstartvc funds, vi $192,168,111 + opp iii $175M for existing cos🚀 Same mission + more excited than ever to be a Day One partner for technical, under🐶 founders building the future of Developer First, Crypto Infra & SaaS Who's ready to build 🏗️? https://t.co/UsOgjRmYLn
Also, some fun news, it looks like I’ll be doing my job for a few more years as a Partner! Even more exciting than that is the news that my colleague, Ellen Chisa has also become a Partner (there’s a lot of funny stories about how we convinced Ellen to join the team, the nebulous title she chose for her role, and our secret hope that she would one day join us as an investing Partner)! She writes an excellent newsletter diving deep into detailed tactics around product, running a company, and all things startup building. I encourage all of you to subscribe.
The news caused me to reflect on my time as a VC and 6 learnings that have helped me improve over the years. Hopefully this is helpful to others as well.
People build businesses and the biggest factor involved with success/failure in business is around People Coordination
Go niche to go broad
Focus on users & usage
Map product to gtm for successful distribution
Use capital as an asset if distribution has already been established
Enjoy the good times at every phase of the company!
Why I Wish I Had Studied Industrial Organization in College
One of the hardest things to understand unless you’ve worked at an early stage startup, is just how much people matter to building a successful business. I’ve been at both a 60k person company and a 3 person startup. At the 60k company, you focus on only your role and what you can influence which is a smaller sphere. At the 3 person startup, everything you do matters from helping set up payroll, to unblocking a legal issue on a contract, to helping another employee understand their role.
What’s interesting is how much people structure and organization matters in the future. Culture is the way decision making is done throughout the org from ICs to managers. The way that decision making framework is understood is through org structures.
The most successful companies we’ve seen carefully think about how teams will be structured and how to best ease the communication between these teams. This is why reorgs happen as companies go through phase shifts and why we’re seeing the creation of new roles like Chief Of Staff, Voice of the Customer (Product Operations), etc.
Even in the early days, one of the most common failure modes is communication channels breaking down whether between co-founders or as the team expands from 5-10 and product feedback/bugs/issues/user insights don’t get surfaced as readily. Spending time on people organization early and often leads to more success down the road.
Go Niche to Go Broad / Start Small to Go Big
In the beginning of creating any product the narrowest scope possible is usually the best approach. Why? Because as more scope is added to a product, it requires more customer onboarding and education. Believe it or not, more product in the beginning can lead to more friction no matter how well designed the user flow is. Starting from a narrow scope allows for faster iteration with users with the smallest amount of resources spent and cost on both the user’s and startup’s side. The feedback loop is as close as possible at this stage. Once the foundations are set, it enables faster scaling in the future.
Why start with a specific niche? Focusing on that niche enables more targeted content, more iteration on specific user workflows, and more potential for spread of user love. The communities and conferences where you can reach the most relevant users is easier with that focus. This all leads to a better foundation in the product and user empathy from the beginning.
Usage Matters More Than We Think
This one may seem self evident but in the early days of a new product, usage matters more than number of users. If you can show that you can get 1 user to love the product, then you can likely find 1k more like that user. If however, you need to consistently hop from new user to new user to get engagement, that is likely a sign that the product is not solving a pain point deep enough for anybody.
Everyone talks about user love. However, some of the most successful products in the world are products that users loudly complain about. Talk to users of Jira or Salesforce CRM and you’ll see what I’m talking about :) There are definitely loud complaints but also lots of continued user engagement.
Product Needs to Be Tied to GTM
I wrote a more detailed post here so will save some words. Suffice to say the “weight of the product” needs to be mapped to the go-to-market. So as much as you hear everyone talking about “product-led growth”, focus more so on who the end user is in an org, how many stakeholders will be affected by the product, and how heavy the implementation is to map to the gtm.
Capital Can Be a Competitive Asset When Distribution is Established
In recent times, words have been bandied about like “Capital is a weapon”. I think its important to distinguish between when capital can truly be an asset vs not. Before a startup has figured out scalable distribution, capital is not necessarily an asset. While it does give more cash cushion and resources, as we’ve shown with starting small before going big, throwing bodies at a problem doesn’t necessarily solve anything. In fact, it can be used to paper over fundamental issues. A common problem solving failure mode is “if we just hire more people, we’ll be able to fully address this feature or product messaging issue”. Do that enough times, and the problems still aren’t fixed and costs explode. Once scalable distribution has been achieved, then having more capital is indeed a huge asset. It allows a startup to move faster, take more market share, iterate on product quicker, and get more surface area with potential customers to prevent other competitors from getting in front of them.
Have Fun Frequently
The best (and worst) part of the startup journey is the constant ups & downs. From getting the first key hire, to losing the first customer to a competitor, to having the biggest ARR quarter to date, to not hitting budget for the quarter, at every phase of the company there will always be major wins and major losses. Make sure to stop and smell the roses! Enjoy those wins, take pictures, celebrate with the team on the accomplishments as those memories will keep people going through the tough times and bring everyone even closer together during the good times. Plus, when a major event occurs, it’s always a good time to go back and look at the memories!