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An Underappreciated Way to Get a VC’s Attention

message, fundraising, investor list, how to get a VC's attention

It’s been a trying time for founders to fundraise in these turbulent times. On one end, you have investors who took a U-turn on plans to invest this year. On the other, you have investors still deploying or looking to deploy capital. The latter further breaks down into: (a) investors who are taking more calculated bets – raising the bar for the kind of startup that gets the capital, and (b) investors who find the opportunity to invest in the down markets. The latter cohort of the latter cohort seems to hold truer at and prior to the pre-seed stages among microfunds and angel groups.

The Tightening of the Market

Disregarding the investors who aren’t deploying capital anymore, it’s been harder than ever to raise. Here’s why:

  1. Anecdotally, more startups are looking to fundraise. Many have pushed up their fundraising schedules.
  2. The standard is much higher now than before. And that includes a stronger consideration for the problem you’re addressing. Is it anti-fragile? Is it recession-proof? If your numbers are down now, will they eventually ‘flip’ back on track post-quarantine?
  3. Valuations are taking a hit. Where before your startup may have been overvalued (especially in Silicon Valley), many startups are facing “more realistic” round sizes. And flat or down rounds are more prevalent.
  4. When investors can’t meet founders in-person, they’re resorting to data, data, data. Investors no longer have the luxury to benchmark a gut check over Zoom/email, as they would have in noticing micro-gestures and other situational context clues. Anecdotally, investors are spending much more time and putting much more weight on diligence than before.

And, that’s why founders, more than ever, should (re)consider fundraising strategies. This was something that I learned when I was on the operating side and at one point, working on the fundraising front for Localwise.

Much like when high school students apply for college, founders should have a three-tiered list – SMR, as I like to call it:

  • Safety,
  • Meet,
  • And, reach.

Safety

Safety investors are those that are definitely going to take the meeting. And will most likely invest in you (i.e. at the idea stage, this mostly comprises of family, friends, and colleagues, maybe even early fans via crowdfunding). Admittedly, they can only contribute small sums of money. Each check also carry little to no strategic weight on the cap table.

Meet

Meet investors are investors that will most likely take the first meeting, but you’ll need to do a little leg work to get them to invest. Many of these will most likely stick to being participants than leads in any round. They carry some strategic weight on the cap table – in the capacity of their network, their brand, or advice.

Reach

Your reach investors will be your greatest sponsors. The people who have the highest potential to get you hitting the ground running. These folks usually have crowded inboxes already. And you’ll need to figure out how to best reach them. Unless they reach out to you, you will most likely fall just short of their gold standard. But once you stget these onboard, your relationship will set you up for reaching your next milestone better than any other individual partnership. At the same time, they will be the ones who are most likely going to have true conviction behind your product, your market insight, and your team. They typically lead rounds, and carry great strategic value to your startup (i.e. top tier investors, SMEs, product leaders in your respective vertical). For lack of better words, your ‘dream girl’ or ‘guy’.

Your Priorities

When pitching (and practicing your pitch), go for a bottom-up approach. Safety, then meet, then finally reach. And ideally, by the time you’re pitching to your ‘dream girl’ or ‘guy’, you’d have refined your pitch that best fits their palate.

When prioritizing time and effort, go top-down. Since you have limited bandwidth, spend the most time doing diligence on your reach investors. Then meet. And if you still have time, safety.

Diligence and Reaching Out

During your diligence process, look at their team, their individual and collective experience. Is their partnership, especially the checkwriters, diverse? Were they former operators? Or career VCs? And based on what they have, what do you, as a founder, need the most right now? Also, to better understand the marriage you’ll be getting in to, talk to their portfolio startups and investors that have worked with them before. Pay special attention to the the venture bets that didn’t work out. Was there a break up? If there was, what was it like? How did the investor help them navigate tough times?

It’s easy to be positive and cohesive when things are working out, but how does that investor react when things aren’t going as expected?

After talking to the (ex-)portfolio founders, if you feel like they have a good grasp on what you’re working on and are excited for you, ask them for an intro. Focus on those founders who have gone through the idea maze in your respective vertical, or an adjacent one. If you’re defining a new vertical, or that investor has just never invested in your vertical, but has expressed public interest of pursuing investments in yours, ask founders who have the same or a similar business model to yours. After all, that’s going to be the kind of solid warm intro you want.

In Closing

Though there are other ways to get in front of investors (some more questionable and/or gutsy than others), including, but not limited to:

  • Warm intros from friend/mutualLinkedIn connection,
  • Cold email/DM,
  • Reaching out to a more junior team member (scout/analyst/associate/principal),
  • Presenting at accelerator/incubator Demo Days,
  • Presenting at a hot conference, like TC Disrupt or SXSW,
  • Volunteering at the same non-profit as them,
  • Auditing their lecture at Stanford,
  • Or, squeezing into their elevator (although most VC offices are pretty lateral)…

… anecdotally, it seems many founders overlook the means of getting an intro from a VC’s portfolio.

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How Marriage Counseling Advice Applies to Managing Team Dynamics

marriage, relationship dynamics, team dynamics

Last Friday, I jumped on a call with my wickedly-creative founder friend. Given his cognitive flexibility, our conversations usually span a multitude of topics. And our Friday call was no exception – from product design to community management to de-stressors. Then, finally, marriage counseling and its applications in managing team dynamics.

Empirically, I focused my attention on co-founder dynamics when sharing an exercise I learned in my expedition to find the curiously passionate and the passionately curious. But I realize now that there are so many direct parallels on a broader scale to teams at large. From none other than a marriage counselor.

I want to preface that this exercise isn’t designed to be universal. And there’s a good chance it may not be useful for the situation you’re in or have been in. But nevertheless, hopefully, it can be another tool in your toolkit. So, if ever, when you do feel the need, it’s something that you can pull from your arsenal.

The Exercise

  1. Start every day gauging your individual gross energy level (i.e. motivation, excitement, emotional state) on a percentage scale with your partner(s)*.
    • * Yes, this was shared to me from a perspective that was inclusive of various forms of romantic relationships, including polyamory. Though I find it to be equally useful, when used among multiple co-founders/team members.
    • To put it into perspective, I usually sit around a 60-70%. When I’m inspired, motivated, or feel I can take on the world, I’m at 90-110%. Although extremely rare, when I’m down (i.e. sick, depressed, sad, unmotivated, stressed, in emotional turmoil, burnt out, or when I just want to regress to my shell), I’m usually at a 10-20%.
  2. Assess if you and your partner(s)’ collective energy level add up to 100% or more.
    • If one of you is feeling down, can (the rest of) you make up for that energy deficiency?
    • If I’m feeling 10%, and I just find it hard to get shit done, can my partner make up that 90% and help us as a team champion the day?
    • And let the person hovering 10% take the day off.
  3. If the collective energy just isn’t there, then the team falls on 2 types of contingency plans.
    1. Can you design a system (or if you already have a system in place) where all of you don’t have to put in 100%, but can still get things done?
      • Maybe this is the day to clean your house. Or wash the car.
      • For founding teams, maybe this is the day the whole team just does data entry.
      • For content creators, I hear this is the day to go through fan mail.
    2. Take the day off. Yes, the full day. And, no halfies. As great philosopher, Ron Swanson, once said:

“Never half-ass two things; whole ass one thing.”

  • Go take a day trip into the wilderness. Play video games. Read a fiction book. Draw. People-watch in a cafe (well, after the quarantine). Netflix-binge. Go tackle something on your bucket list.
  • And cap the downside – the potentiality of a slippery slope. I usually cap it at 3 days. Any longer, the counselor recommended seeing a relationship specialist.
    • Relationship counselor, if romantic.
    • Therapist/psychologist, if emotional.
    • Executive coach, if pertinent to co-founders.
    • Organizational therapist/psychologist, if pertinent to team.

What I didn’t realize until the Call

It seems obvious in retrospect, but it didn’t click until my buddy and I were thinking aloud. Subsequently, we realized how pertinent that exercise can be in understanding team workflows, as well as knowing when to double down and when to backpedal. Productivity has taken a sharp decline in this pandemic. For many, they’ve felt busier and working longer than before. The lack of diverse human interactions – for both extroverts and introverts – is really taking a toll. After all, we’re a social species. For managers, co-workers, and lateral teams, this exercise can be a way you can proactively assess your team’s morale and mental health. Assess early and optimize flexibly.

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The Third Leg of the Race

swimming, the third leg

I dedicated three-quarters of my life before I turned 18 to swimming. More than half of which I spent competitively. Although I never amounted to a Michael Phelps or Katie Ledecky, the years I spent swimming were some of the happiest, yet character-building times of my life.

I was a mid-to-long-distance swimmer – anything between 200 yards (or meters) to miles-long open-water swims in the SF Bay. By golly, the waters in the latter ‘pool’ were dirty. I couldn’t see my own hand when I reached out underwater. But I digress. As a distance swimmer, the biggest lesson I learned was how to fight the mental battlefield.

The Legs of a Race

Coach taught me to break every race down into 4 quarters. The first leg, the second leg, the third leg, and the last leg.

The first leg is comparatively the easiest. You’re brimming with energy, motivation and (potentially nervous) excitement. As long as you don’t exhaust yourself in this leg, but put in enough effort to break away from the pack, you’re golden. And in doing so, you’re going at 80% of your top speed.

The second leg is when you start engaging in a psychological battle with your competitors. Understand where they are in the race, as well as their racing personas.

  • Are they a front-half or back-half swimmer?
  • Are they a sprinter from the blocks?
  • Do they typically negative split in a race?
  • In an individual medley (IM) race, what’s their best stroke? Their worst stroke?

I typically dial back to 70% speed.

The last leg is probably the second easiest. You burn everything and anything you have in the tank. The goal is in sight – within reach. It comes down to how well you’ve raced the first three legs, and how much you trained. Effectively, it is a battle of strength – a Hail Mary. 110% speed.

Now let’s rewind back to the crucial leg I skipped. The whole reason I started writing this post.

The Third Leg of the Race

Whereas the second leg is based on ‘external warfare’ and the last leg is based on ‘physical warfare’, the third leg, and arguably the most important, is one based on ‘internal warfare’. By this point in the race, you’ve exhausted more than half of your energy, yet you’re expected to output more than when you started. You’re worn and tired. And, you can’t see the goal yet, so you know you have to save some strength for the last leg.

Yet, if you can hold this leg, it can mean the difference between a win and a loss. If you lose this leg and succumb to your thoughts, your chances of winning are slim. Quite frankly, it sucks.

So I made bets with myself.

“If I can finish this lap in 14 strokes, where I’m reaching out and scooping that ice cream just out of my arm’s reach, I’m going to treat myself to some Haagen Dazs after. One scoop for every lap I succeed in.”

“I’m going to flip turn faster than my opponents. And if I can do this thrice in a row, I’m going to get rock-solid abs when I finish this race.”

“I’m going to hold my breath till the other side of the pool, so I can smell and taste the teriyaki chicken.” *At swim meets, they’re always selling teriyaki chicken and rice for lunch. It’s greasy, super salty. But if you add some sriracha, it is a hungry swimmer’s heaven.

As you might notice, some of my bets were outright ludicrous. But it was because they were crazy that I was motivated to keep going. When there were no tangible goals, I made my own.

Why am I sharing this?

Life, seeking employment, running a business, and so much more run in the same way. After your academic career, no one really tells you what your goals are or can be. You have to make your own. When you’re job-seeking and no interviews are coming your way, you have to muster the strength to continue applying – either spraying and praying or finding creative ways to obtain certain opportunities.

In startup land, day 1 till day 365 (or even till day 730) will be a honeymoon. It’ll be the first leg. You’re hacking away by yourself or with pals on something you feel strongly about. For many, your next leg is scoping out the competition and pacing yourself.

  • Should you launch with press releases on TC, NY Times, etc?
  • Should you stay in stealth?
  • Can you continue bootstrapping?
  • Do you need to hire more people to help you out?
  • Which distribution channels are the most effective? Overlooked by competitors, but you think there’s a lucky draw in it.

And then, there’s the third leg. The leg that will decide if your adoption curve forms a hockey stick or a pitcher’s mound. You have a vague idea of where you need to go, but you haven’t hit critical mass. You’re questioning your initial assumptions. You might even be questioning yourself. Did you make the right calls? Is there anything you missed? What went wrong? Should you have just taken the job your friend offered?

But if there’s anything we’ve learned from some of the best entrepreneurs out there. It’s the ones who weather the storm – the ones who have that grit – that often make it. Being able to weather that third leg doesn’t guarantee success. But not being able to weather it is close to a sure-fire for failure.

As a world…

We’re on the third leg now.

And what we do now will decide if we win or lose the race.

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Finding the Sweet Spot – Iterating What and How You Measure Product Metrics

iterating product metrics, measure, measuring tape

Many founders I meet focus on, and rightly so, optimizing their core metrics – a set of units that surprisingly don’t change after its initial inception. But metrics and the way you measure them should undergo constant iteration. Metrics are a way to measure and test your assumptions. 9/10 assumptions, if not all, are honed through the process of iteration. And by transitive property, the metrics we measure, but more importantly, the way we measure them, is subject to no less.

Though I’m not as heavily involved on the operating side as I used to be, although I try to, the bug that inspires me to build never left. So, let’s take it from the perspective of a project a couple friends and I have been working on – hosting events that stretch people’s parameters of ‘possible’. Given our mission, everything we do is to help actuate that. One such metric that admittedly had 2 degrees of freedom from our mission was our NPS score.

The “NPS”

“How likely would you recommend a friend to come to the last event you joined us in?” Measured on a 1-10 scale, we ended up seeing a vast majority, unsurprisingly in hindsight, pick 7 (>85%). A few 9’s, and a negligible amount of 5s, 6s, and 8s. 7 acted as the happy medium for our attendees, all friends, to tell us: “We don’t know how we feel about your event, but we don’t want to offend you as friends.”

We then made a slight tweak, hoping to push them to take a more binary stance. The question stayed the same, but this time, we didn’t allow them to pick 7. In forcing them to pick 8 (a little better than average) and 6 (a little worse than average), we ended up finding all the answers shift to 6s and 8s and nothing else. Even the ones that previously picked 9s regressed to 8s. And the ones who picked 5s picked 6s. Effectively, we created a yes/no question with just this small tweak.

There’s 3 fallacies with this:

  1. Numbers are arbitrary. An 8 for you, may not be an 8 for me. Unless we create a consolidated rubric that everyone follows when answering this question, we’re always going to variability in semi-random expectations.
  2. It’s a lagging indicator. There’s no predictive value in measuring this. By the time they answer this question, they’d already have made their decision. Though the post-mortem is useful, the feedback cycle between events was too long. So, we had to start looking into iterating the event live, or while it was happening.
  3. Answers weren’t completely honest. All the attendees were our friends. So their answers are in part, a reflection of the event, but also in part, to help us ‘save face’.

In studying essentialism, Stoicism, and Rahul Vohra‘s Superhuman, we found a solution that draws on the emotional spectrum that answered 1 and 3 rather well. Instead of phrasing our questions as “How much do you value this opportunity?”, we instead phrased them as “How much would you sacrifice to obtain this opportunity?” Humans are innately loss-averse. Losing your iPhone will affect you more negatively and for longer, than if you won a $1000 lottery.

So, our question transformed into: “How distraught would you be if we no longer invited you to a future event?”, paired with the answers “Very”, “Somewhat”, and “Not at all”. Although I’m shy to say we got completely honest answers, the answers in which we did give allowed for them to follow-up and supplement why they felt that way, without us prompting them.

The only ‘unaddressed’ fallacy by this question – point #2 – was resolved by putting other methods in place to measure attention spans during the event, like the number of times people checked their phone per half hour or the number of unique people who were left alone for longer than a minute per half hour (excluding bio breaks).

Feedback

“How can we improve our event?” We received mostly logistical answers. Most of which we had already noticed either during the event or in our own post-mortem.

In rephrasing to, “How can we help you fall in love with our events?”, we helped our attendees focus on 2 things: (1) more creative responses and (2) deep frustrations that ‘singlehandedly’ broke their experience at the event.

And to prioritize the different facets of feedback, we based it off the answers from the questions:

  • “What was your favorite element of the event?”
  • And, “How distraught would you be if we no longer invited you to a future event?”

For the attendees who were excited about elements closely aligned with our mission, we put them higher on the list. There were many attendees who enjoyed our event for the food or the venue, though pertinent to the event’s success, fell short of our ultimate mission. That said, once in a while, there’s gold in the feedback from the latter cohort.

On the flip side, it may seem intuitive to prioritize the feedback of those who were “Very distraught” or “Not at all”. But they exist on two extremes of the spectrum. One, stalwart champions of our events. The other, emotionally detached from the success of our events. In my opinion, neither cohort see our product truly for both its pros and cons, but rather over-index on either the pros or the cons, respectively. On a slight tangent, this is very similar to how I prioritize which restaurants to go to or which books to read. So, we find ourselves prioritizing the feedback of the group that lie on the tipping point before they “fall in love” with our events.

Unscalability and Scalability

We did all of our feedback sessions in-person. No Survey Monkey. No Google Forms, Qualtrics, or Typeform. Why?

  1. We could react to nuances in their answers, ask follow-up questions, and dig deeper.
  2. We wanted to make sure our attendees felt that their feedback was valued, inspired by Google’s Project Aristotle.
  3. And, in order to get a 100% response rate.

We got exactly what we expected. After our post-mortem, as well as during the preparation for our next event, I would DM/call/catch up with our previous attendees and tell them which feedback we used and how much we appreciated them helping us grow. For the feedback we didn’t use, I would break down what our rationale was for opting for a different direction, but at the same time, how their feedback helped evolve the discourse around our strategic direction. Though their advice was on the back burner now, I’ll be the first to let them know when we implement some element of it.

The flip side of this is that it looks extremely unscalable. You’re half-right. Our goal isn’t to scale now, as we’re still searching for product-market fit. But as you might notice, there are elements of this strategy that can scale really well.

In closing

Of course, our whole endeavor is on hold during this social distancing time, but the excitement in finding new and better ways to measure my assumptions never ceases. So, in the interim, I’ve personally carried some of these interactions online, in hopes of discovering something about virtual conversations.

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Asking for Mentorship

asking for mentorship

Don’t.

… would be my short answer.

The longer answer… I’ll start with a story.

My First Mentor

This is embarrassing to admit, but 6 years ago, I barely knew what a resume was. As a hint of my ignorance, my first ‘resume’ was 3 pages long, double-spaced, and included two lines explaining a babysitting license I got back in middle school. So, within 10 seconds of it going up, I signed up for the resume workshop. In my hurry, I signed up for the first spot with the first “critique-er” I saw.

When the fateful day arrived, he didn’t show up at our appointed time. After waiting 15 minutes and asking the workshop leads, it turned out he was stuck in the depths of traffic.

But hell, I wasn’t going to go home empty-handed. So, I went around the bustling room, catching each “critique-er” there whenever they had a break, to ask them to look over my sad excuse of a resume. By the end of the two-hour workshop, I had taken notes about the flaws of my resume from every alumni there – half of whom ran through various interview questions with me – except for one. The one I had initially signed up with.

After hearing gossip and rumors from the alumni of how brutally honest he was, I had to meet this mysterious fellow. Eventually, he arrived. And luckily, the alumni invited me to join them for a late dinner. And that night, he left me with one sentence: “If you want my advice, you better take it seriously.” Not in the sense that I need to follow exactly what he tells me, but that I won’t hear then forget it the next morning.

Over the years, I’ve truly appreciated the analytical mind he brought to temper my creative mind. His advice saved my neck saved my neck at multiple crossroads of my career. He was able see around the corner when I couldn’t – a tactical mentor. Though I didn’t use his advice every single time, I always came back to him with the post-mortem.

  • How did I use his advice?
  • If I did, what was its impact?
  • If I didn’t, what was my internal calculus for choosing so?

He never pressured me to use his advice, nor did he ask that I report back to him each time. But I did. Over the years, I’ve been there for his highs and lows, just like he has been there for mine. Before we became mentor and mentee, we realized we had become friends. Ironically, to this day, he still hasn’t seen my resume.

The Bigger Picture

You might call it availability bias, but over the 6 years since then, I’ve reached out to many people – punching above my weight class, inspired to seek mentorship. But out of all the 20+ people that I asked for mentorship on the get-go, not a single one was willing to take on the responsibility for a stranger. And rightly so. Like any other relationship, mentorship requires time and commitment. Without any precedence, it’s hard to make that decision with asymmetric information.

The Venture Parallel

Even as investors, who notoriously have to be willing to not only mentor others through “just a pitch”, but also commit dollars to where their mouth is at, each round of startup funding takes at least 60-90 days of diligence and working together, before we invest. Our goal is to be ‘the best dollar on your cap table‘.

In a literal sense, a dollar is a dollar. Whether you get it from your parents as an allowance when you were 7 years old or from your managerial salary at 27 years old, it’s the same. But, in venture, there’s ‘dumb money’ – money in its most literal sense. And there’s ‘smart money’ – money that comes with advice, resources, social and professional networks, and help.

In most cases, an early-stage founder wants ‘smart money’. In that frame of mind, you want the investor(s) that have the best networks, the best resources, the best expertise, and possibly, the best brand, at your stage of a business. So your pitch should be hyper-specific. As with any ask in the world, nothing is ever guaranteed. But, to increase your chances of a “yes”, the best founders build that relationship before they need to fundraise.

Circling Back

For any other person out there, whose day job isn’t to take measured capital risk, you’ll have to work even harder to convince someone to take that leap of faith with you.

When you ask for mentorship, or advice, in general, follow through with it. Make it known that it is valued. And, show your progress after having tried it out. No person speaks hoping to reach deaf ears. So, if you don’t think you’ll have the mental and physical bandwidth to turn advice into action, don’t ask for advice. And definitely, don’t ask for mentorship. It’s not worth your time or theirs.

As a footnote to myself and to others who may be seeking advice, even with this mindset, there’s no silver bullet. Be curious. Be mindful. And, be creative. My favorite creative ‘ask’ so far is “I will pay you to work for you”.

And to my first mentor, Happy Birthday!

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#unfiltered #7 Words are Food – Having Empathy, Job Resources Now, Letting Staff Go, and Perspective Shifts

words are food, empathy

I jumped on a call with my good buddy, incredible founder and one of the most magnanimous people that I know, Mike, not too long ago. And no, he did not pay me to say that. As always, we nerded about everything on the face of this planet, but one thing in particular stood out to me. And inevitably manifested into the foundation of this #unfiltered post. He said, just 3 words:

“Words are food.”

The more we delved into this rabbit hole, the more robust the metaphor began. But for the sake of not running your ear off, I’ll cover just one facet of our parallel.

Compliments are sweets. They’re great in moderation, but too many give you cavities. They wrap up a great meal, but you cannot live your life only indulging in compliments. On the other hand, constructive criticism are your vegetables. They may not taste the best, but they’re healthy for you. And a healthy diet should consist of mostly fruits and veggies. Yes, brussel sprouts and eggplants too. Of course, it’s important to note that blatant criticism, like “You suck” or “You’re dumb” is garbage. They neither taste good nor are they healthy for you. You can smell it from miles away. So just steer clear.

After all, you are what you eat. ๐Ÿ˜€

Empathy in Words

In the past 4 months, we are all going through a transitory stage in our lives – some more drastic than others. Some of us have experienced the deaths of loved ones. Some, a test of relationship integrity. Others, career shifts and a change in household income. For those of you who have been affected by the job market, my friend passed me this resource which I hope you’ll find use in honing your job search. Anecdotally, it seems pretty accurate.

And almost everyone, a dietary change and restriction, due to the market’s supply and demand. And it’s more important a time than any (not that you shouldn’t when the curve flattens and the markets recover), be empathetic.

Be kind – with your actions and your words. In these times, it’s so easy to be caught up in what’s not going right in your life, but you’re not alone. You never are.

Empathy in Business Now

Although this applies to so many different aspects of our lives, I’ve found its pertinence on the business front recently. When the focus of businesses now is on cash preservation rather than growth, which I’ve alluded to in previous posts (1. cash in private markets, 2. heeding advice , 3. brand as a moat), aggressive decisions can be tough. As the saying goes, measure twice, cut once.

Here are some examples of said (preemptive) decisions I’ve seen from founders so far:

  • Reallocating 30% of the company budget to the core business from expansion and venture bets (70-20-10 rule of thumb to 100-0-0)
  • 50% cut to CEO salary, 10% cut to management, 5% from everyone else, to try to minimize layoffs
  • 100% cut to founder(s)’ salary, 35% cut to management, everyone else keeps theirs the same, while offering healthcare benefits for temporary workers/contractors

The conclusion for some founders may reach the point of laying off people who followed you believing in your dream. You can check out Mark Suster‘s, Managing Partner at Upfront Ventures, rubric for questions you need to consider in empathetic moments of business decisiveness.

Empathy won’t change decisions. The tough, but true remarks are your vegetables. People will still have to eat them, but be understanding of where the people eating the food you cooked up are coming from. Rather than boil your brussel sprouts, offer crispy ones with a soy glaze, a little heat, and a layer of bonito flakes.

Perspectives Forward

Recently, I had the fortune of connecting with a founder whose parents were refugee who found sanctuary in the states. She put things wonderfully into perspective, when comparing the current situation to the one she was familiar with as a child.

“There are 2 camps of refugees: (1) those who want things to go back to the way they were before, and (2) those who move forward knowing that life will never return to the ‘normal’ they once knew.

“And those who progress forward are those who believe in the latter.”

When the dust settles after all of this, life won’t ever be the same as it was 4 months ago. The hospitality, transportation, travel, and service industries, just to name a few, will irrevocably change. You friends and family may have lost dear ones.

Alas, I’m an optimist. And I know that we’re going to come out stronger than we were when we went in. We’re going to have to get used to a new diet. I dare say, even a new vernacular.

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. Itโ€™s not designed to go down smoothly like the best cup of cappuccino youโ€™ve ever had (although hereโ€˜s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

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Brand as a Moat

startup brand, moat, defense, defensibility
Photo byย Keith Johnstonย onย Unsplash

What is the underlying notion that makes this product work?

It’s the question that almost every investor, especially early-stage startup investor, tries to answer when they’re entertaining potential investments. Some close cousins include:

  • What social, economic, or political trend is enabling this technology/business to work?
  • Why will people want to continue using this product? Consciously? Subconsciously? How much will they regret not being able to use this product?
  • Why is this idea crazy good, and not just crazy?
  • Is there a predictable road to traction? Product-market fit? $1M ARR? etc.
  • Is this a scalable business?

Needless to say, when I chat with founders, their business’s defensibility often comes up. Every business – small or large – needs to be defensible. Grandma’s cookies are just that good ’cause of that ‘secret’ brown butter element. Or Sally’s lemonade stand sells better than her neighbor’s down the street since she can keep her drinks cool for longer. Just like every good medieval castle has a moat, possibly filled with alligators, every good business has to have that one (or many) unfair advantage, as they call it in B-school. Not that I ever went, but I’ve heard from friends and professors who have. And this is even more true if you want to build a scalable business.

Those who have gone generally claim that their moat is their experience at X Fortune 500 company. Those who have a technical background often claim that their moat is their IP – patents owned and pending. Neither are wrong. And frankly, there are a multitude of factors that come into play when arguing for a business’s defensibility. And most of the times, it’s a permutation of the above and more. But the purpose of this post is to focus on an often discounted notion of brand as a moat. Both the company brand and the personal brand.

Disclaimer:

I should mention that before you even consider your business’s defensibility, and subsequently, brand, first, make a damn good product. I’ve seen too many founders take that leap of faith before they even have a product. They pitch the dream of them making a better world – the company vision – before they even figure out the first steps they need to take to get there.

The only ‘exception’ to this rule, at least from a fundraising and pre-PMF perspective, is if you have an amazingly robust personal brand. Though that may help with early traction, it won’t be enough to sustain a scalable business in the long run.

The startup brand

Your startup’s brand is a collective composed of the:

  • Company mission,
  • Company vision,
  • Internal culture,
  • And, the openness and responsiveness of the team.

The vision is that ultimate dream. The mission is what you’ll do now to get to that dream. Back in college, someone I really respect put it to me like this:

“The vision is the Sun. The mission is that ladder up. You can’t get to the Sun without building a ladder. If you only stare at it, you’ll eventually blind yourself. And if you just build a ladder, or else you might up on Mars instead, poorly equipped to survive there.”

Culture is something that you can set at the beginning, but know it’ll be an evolving beast with every new hire and every new incident. What you let happen defines the new culture. Although I share my thoughts in a post earlier this year, Ben Horowitz puts it into a much better perspective in his book, What You Do is Who You Are: How to Create your Business Culture. Quite a story-filled read, especially when you’re looking for something to do at home now.

And, the above three culminates into how your team acts.

  • Do your current customers/users feel like their concerns are either addressed or at least, valued?
  • Do they feel they are a valued member of your community?
  • What is your customer satisfaction rate? NPS score?
  • How do you prioritize and act on customer feedback?
  • Are your users engaged? How do you reengage them, if they become inactive?
  • For apps, what are they saying on the App Store/Play Store?
  • And, how are new customers hearing about your product? What do they hear? What are their explicit and implicit assumptions when using your product?

Why it Matters

Together the 4 elements answer the fundamental questions:

  1. Why would a potentially great customer want to use your product?
  2. Why would a potentially great hire want to join your company?

In the past few months, many VCs have been shifting their investment focus from consumer and towards enterprise/SaaS. There’s the argument that consumers are (1) more expensive to acquire (increasing CAC; the average number of apps a person downloads a day is zero), and (2) harder to retain. (For a more in-depth explanation, I would recommend you to check out the “Consumer App Conundrum” section here.) Aka, it’s more competitive than ever in the consumer markets. When we get closer to perfect competition over a saturated market seeking attention, having a great product just isn’t enough anymore. When some of the most active and vocal consumers happen to be people on the younger spectrum (millennials and Gen Zs), to fight for their attention, you need a brand that resonates with them on causes they care about – whether it’s diversity or climate change or another social cause.

We see this notion affecting two other verticals: the public sector and enterprise.

  • The privatization of X (let X be education, healthcare, transportation, etc. for all that were empirically public sector functions)
  • The consumerization of enterprise

For the purpose of this piece, let’s look at the consumerization of enterprise. What does that mean? Before enterprise sales worked from a top-down approach. A founder of an enterprise/SaaS startup pitches to a senior executive at a Fortune 500 (or similar) company. And the executive makes the call and the budget allocation towards their team’s usage of said product.

Now, many startups/companies, like Slack, Trello, Lever, and Soapbox, are taking the bottom-up approach, garnering brand loyalty among the people who will be/are using the product itself. And I predict that’ll be so in the near future for Superhuman, the fastest email client, and Woven, my favorite calendar app, as well. After all, progress happens at the most junior level. If you take it in relation to a tech startup of 200 in its growth phase, the founders or executives can make a plan and set deadlines. But if your most junior developer isn’t working on it, the whole business halts to a stop. All this makes me quite bullish on products in the low-code/no-code space, as well as in towards the future of work.

Moreover, this has led enterprise products to be heavily personalized, constantly updating, and has paved the way to multi-modal business models (i.e. subscription and pay-per-use). All this maximizes user satisfaction, which in turn affects their productivity, and transitively, the business flow.

Although the job market looks wildly different now than it did 3 months ago, when I assume the average founder is looking for cash preservation over growth, you still should be cognizant about the latter going forward.

Your Personal Brand

Your personal brand as a founder, or just as a professional, really matters. If you are a founder or thinking about becoming one, start building a public voice. Get people excited about you and what you’re all about.

Why?

Personal brands are extremely scalable and have built-in virality. You put one post out. Some percent of your followers engage with your content by liking or commenting. Then either by social media’s algorithms or by their innate excitement, they’ll share your content with their friends. Subsequently, new folks discover you and your content. And this becomes a virtuous loop, or network effects, as we call it, that helps get you scalable traction. This is why celebrities, like Dr. Dre and Maisie Williams, and their ventures garner quite a bit of traction among consumers and among investors. This is also why influencer marketing has been so bullish over the past few years.

At some point in your company’s lifespan, your personal brand will become the company brand. And that’ll become either shining beacon or the downfall of your company. More than just the followers you have on social media and in public, you are judged by everyone constantly on your aptitude and behaviors. How open, conscientious, agreeable, extroverted, and neurotic are you? (Yes, I took the 5 traits from the Big 5/OCEAN test.) Each and more have an impact on your personal brand. If we look at the culture behind Facebook, we see how large of an imprint Zuckerberg has on it. For Apple, Jobs.

In closing

The best thing about brands as a moat is that it’s effectively free! But both take years of work in building. As someone on the investing side, I love stellar brands. And it’s one of the elements of a business I weigh heavily on for its potentiality in network effects, summarized in the “Why you?” component of my NTY investment thesis (why Now, why This, why You).

Hmmmm, now thinking about it, personal brand may be the biggest reason I’ve been changing my handwashing habits in the past week… after watching Gordon Ramsay, Alton Brown, and Conan O’Brien‘s tutorials on it.

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#unfiltered #3 Plan Bs – Should we have them?

I woke up today with a thought that’s been gnawing at me for years now. Why do we have backup plans – Plan Bs, Plan Cs, etc? Does it inhibit our drive? Or readily prepare us for the worst? At what point are we sacrificing our commitment for safety?

When I started this blog, my writing mentor recommended that I have 10 pieces written and ready before I launch my blog. And I did exactly that. All cards out, I still have 8 of my pieces saved in my backlogs, which as you have already deducted, I’ve used 2 of my pieces already. Why? My mentor told me that, in my commitment to publish content weekly, I will indubitably have dry spells – dry weeks. And I did… twice. So, I regressed to my lowest common denominator and pulled something out of my archives. But during those two weeks, it helped me stay in my comfort zone. That instead of fighting writer’s block (if such a thing exists), I chose to run from it.

Part of the reason I started this #unfiltered series is to help me be content with content. I am guilty of 8/10 times second-guessing my way out of doing something. If I contemplate over something long enough, I’ll realize fears that I never thought possible, and opt for the safer option – not doing it at all.

From when we were young, we’re taught to always prepare backup options. When applying to colleges, we’re told to apply to our 2-3 reach schools, and 10-15 other schools we’re confident about getting into. When applying to jobs, one of my hometown neighbors, 2 years my senior, advised me to apply to 200 jobs, expect 10-20 interviews, another 3-5 for final rounds, and 1-2 offers to choose from. Effectively, asking me to apply to 198 backup alternatives.

I get it. As the saying goes, beggars can’t be choosers. Both high school and my early years of college have drilled that saying into me – by my peers and by my teachers.

A part of me hates it, but a part of me realizes the truth in there. I saw that circumstances played an even larger role for my friends and peers who:

  • are going through tough times in this pandemic and economic downturn,
  • (whose) parents came from a lower income bracket,
  • are POC (people of color),
  • are female,
  • are/were open about their different sexual orientations,
  • didn’t graduate from a 4-year college,
  • lost limbs or appendages due to accidents or conflict,
  • are/were in debt,
  • and much more.

Half a decade back when I set out to meet one new person that drew my insatiable curiosity a week, I realized I’m a goddamn privileged person living in the 21st century. I’m a perfectly healthy, heterosexual Asian male who graduated from a 4-year university. If all hell breaks loose and my net worth goes to absolute zero, I have my parents’ home to go back to and a room and bed to call my own. And as a full disclaimer, the fact I’m contemplating this question in the first place means I’m privileged enough to do so.

And because I’ve had the liberty to do so, I realized that my greatest personal achievements came from when I didn’t give myself the option of a Plan B. For the people I reached out to and am in touch with above my weight class, I either have given it my all or was prepared to do so. For swimming, I treated each competition as my last, meaning I either gave it my all or nothing. And during more nights than I can count, I beat myself up over my inability to reach a milestone.

Yet, now in the land of venture, we learn to hedge our bets and come up with contingency plans. We learn once again to diversify our portfolio, and not put all eggs in one basket. Does that lead to why many investors fundamentally don’t have the conviction to lead deals?

On the founding side, you have it almost flipped. When you are trying to make ends meet, there will be times you have to take that one option and go all in. And you can’t let go until you do everything you can to make it a reality. When you sit in a position of privilege, you can have several contingency plans to hedge your bets. Ben Horowitz, author, founder, and investor, illustrated the dichotomy in his piece (and one of my favorites) about peacetime and wartime CEOs. There’s a part of me that strives to find that sense of urgency, like a wartime CEO. And go all in. Maybe this pandemic is the test where I can find where my values really lie.

To be frank, I haven’t come up with a conclusion to the dilemma. For now, I can only hypothesis-test and keep good track of the data that comes my way. But, so far, I can say that one’s tolerance for risk is positively correlated with one’s free cash flow.

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. Itโ€™s not designed to go down smoothly like the best cup of cappuccino youโ€™ve ever had (althoughย hereโ€˜s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost).ย Who knows? The possibilities are endless.

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A Small Nuance with Early Growth Numbers

startup growth
Photo by Ales Me on Unsplash

My friend, Rouhin, sent me this post by a rather angry fellow, which he and I both had a good chuckle out of, yesterday about how VC is a scam. In one part about startup growth, the author writes that VCs only care about businesses that double its customer base.

The author’s argument isn’t completely unfounded. And it’s something that’s given the industry as a whole a bad rap. True, growth and scalability are vital to us. That’s how funds make back their capital and then some. With the changing landscape making it harder to discern the signal from the noise, VCs are looking for moonshots. The earlier the stage, the more this ROI multiple matters. Ranging from 100x in capital allocation before the seed stage to 10x when growth capital is involved. But in a more nuanced manner, investors care not just about “doubling”, unilaterally, but the last time a business doubles. We care less if a lemonade stand doubles from 2 to 4 customers, than when a lemonade corporation doubles from 200 to 400 million customers, or rather bottles, for a more accurate metric.

After early startup growth

Of course, in a utopia, no businesses ever plateau in its logistical curve – best described as it nears its total TAM. That’s why businesses past Series B, into growth, start looking into adjacent markets to capitalize on. For example, Reid Hoffman‘s, co-founder of LinkedIn, now investor at Greylock, rule of thumb for breaking down your budget (arguably effort as well) once you reach that stage is:

  • 70% core business
  • 20% business expansion – adjacent markets that your team can tackle with your existing resources/product
  • 10% venture bets – product offerings/features that will benefit your core product in the longer run

And, the goal is to convert venture bets into expansionary projects, and expansionary projects to your core business.

Simply put, as VCs, we care about growth rates after a certain threshold. That threshold varies per firm, per individual. If it’s a consumer app, it could be 1,000 users or 10,000 users. And only after that threshold, do we entertain the Rule of 40, or the minimum growth of 30% MoM. Realistically, most scalable businesses won’t be growing astronomically from D1. (Though if you are, we need to talk!) The J-curve, or hockey stick curve, is what we find most of the time.

The Metrics

In a broader scope, at the early stage, before the critical point, I’m less concerned with you doubling your user base or revenue, but the time it takes for your business to double every single time.

From a strictly acquisition perspective, take day 1 (D1) of your launch as the principal number. Run on a logarithmic base 2 regression, how much time does it take for your users (or revenue) to double? Is your growth factor nearing 1.0, meaning your growth is slowing and your adoption curve is potentially going to plateau?

Growth Factor = ฮ”(# of new users today)/ฮ”(# of new users yesterday) > 1.0

Why 1.0? It suggests that you could be nearing an inflection point when your exponential graph start flattening out. Or if you’re already at 1.0 or less, you’re not growing as “exponentially” as you would like, unless you change strategies. Similarly, investors are looking for:

ฮ”Growth Factor > 0

Feel to replace the base log function with any other base, as the fundamentals still hold. For example, base 10, if you’re calculating how long it takes you to 10x. Under the same assumptions, you can track your early interest pre-traction, via a waitlist signup, similarly.

While in this new pandemic climate (which we can admittedly also evaluate from a growth standpoint), juggernauts are forced to take a step back and reevaluate their options, including their workforce, providing new opportunities and fresh eyes on the gig economy, future of work, delivery services, telehealth, and more. Stay safe, and stay cracking!

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#unfiltered #0 The Intro

Today, I read a 2017 piece on Nylon about advice from black writers to black writers. And there was one particular quote that caught my eye.

“Don’t edit while writing a draft or else you never finish.” – Terry McMillan

I can’t speak for the writing industry as a whole; I can’t even speak for my friends who are writers. Didn’t ask. But I can speak for myself. For this blog. Admittedly, 70% of all pieces I start writing, I don’t finish. And quite honestly, I almost hate that about myself. Writing for eyes that are more than my own has turned me into a perfectionist. The very thing I once swore to not become.

So, I’m going to try an experiment. More so for myself, in hopes of reducing the friction for me to write more. Every so often, I will post something I will title as “#unfiltered”. It’ll be less of a well-constructed thesis or methodical breakdown, but more of a writing to help me think. In sum, it’ll be a brain barf. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity. Don’t feel obligated to read it. In fact, if you don’t like brain barfs, don’t click on any of them, prefaced by its own #spoileralert. But if you do like unfiltered commentary and my rough thoughts, stay tuned. ๐Ÿ˜€

#unfiltered. A series about unfiltered thoughts.

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