Dealing with critique from VCs

I’ve been around. Years back, I used to be dragged all the time to press articles and to be up on stages. That made a lot of people want to talk to me and pick my brain. In fact, I loved talking to them – it was a challenging exercise for an introspective like me. And wow, how much I learned from the wide sampling.

Their most common approach during countless meetings, events, talks – and even while I was chewing lunch – was:

Hi, I like your work, thanks for that. Can I pitch you my startup and get some feedback?

This is how I became conditioned to have a stranger pitching me:

  • I pause and reflect for half a second to incorporate feedback mode
  • I say “Sure!”
  • I shut up and listen

People need to bear with me for my fast talking. I ask questions. Clarify topics. Remember similar pitches and businesses. I share opinions while I’m still formulating them. My brain rushes. It seems someone else is talking through my mouth, because I’m now busy somewhere else in a void, correlating all possible paths and outcomes. I’m not watching their bodies talk – my superego is constantly hammering “I need to be of service. I need to give useful feedback to this founder.”

It always goes on for 3 to 5 minutes. If it happens smoothly, I can wrap it up after a nice conversation. The founder thanks me, I thank them for their trust and ask them to fill me up with news after a while so I can track their improvements. They add me on Linkedin, I accept – it helps me monitor their future work.

Beautiful, right? Unless it got to a common final answer: “This is a hard business to flip. You may wanna check these guys’ stories…” and I followed with sites or blog posts from people who tried the same business and explained why it was hard (or why they failed).

That makes enemies

It took me a couple of years to learn. That comment makes enemies.

What I was trying to do: giving founders some head start. I’d add some suggestions at the end, they must learn from those who preceded them. Founders should propose alternatives to traditional approaches, and MAKE it work – after all, they’re founders!

What some founders take from my feedback: “You have a shitty business. People are already doing it and they’re failing (or they’re better than you). Drop this business, do something else”.

It is a communication problem based on both sides’ expectations. I expect the founder to argue why it’s not so hard, mention the challenges overcome, and the solutions that worked. The typical founder, on the other hand, seems to expect me to validate their businesses and leave with a pat on their backs. But no, that’s NOT what you get when you ask me for feedback.

Over the years, despite of my laser focus and visceral effort on each and every feedback, it led me to collect enemies I didn’t want to make. Some founders meet me today and say “You didn’t like my business a few years ago, and now it’s booming. IN YOUR FACE!”. Some don’t even bear to meet me, and tell a common friend “He hated my business. If only I could show him we’re kicking ass!”

Some say “That comment from him made me so angry, I worked my ass off, got sick, and stayed up late most of the nights for 2 years. Now I can show him we’re finally making money!”.

Go figure.

The other side

At the same time, I get word from founders saying “Thanks man, I just exited my startup and you helped me a lot. You said my previous business was not good. You were right and I pivoted to the new one. Because of that, I made it grow and just got acquired. Well, it was indeed a shitty original business.”.

What is the difference? If you ask for VC feedback, EXPECT to be challenged. VCs are not the holders of truth… But their whole business model is having you, as a founder, being right. So beat our arguments to pieces and yes, make us regret we didn’t invest on you.

It’s NOT personal. This is the way.

Less mentoring, more engagement

Linkedin is gradually becoming Facebook, and everybody noticed. Self-esteem and self-help posts, people patting themselves on the back, and neverending flame wars over comments. Linkedin importance for professional interactions is becoming much more for interactions than “professional”. And wow, how needy are people nowadays.

In the startup and venture capital worlds, there’s a predominant Linkedin trend when it comes to the “Statup Mentor” title on profiles. Despite of being such a 2012 thing, it’s a sprinkle that subtitles many, many people somehow tied with the startup scene.

After a long time without posting, I caught myself raising one eyebrow on the mentoring issue. I’d like to see what you think about it, even if it’s just harmless profile coloring.

Mentorship is not that fancy
The first thing those people must understand is that “mentor” doesn’t qualify one as a better professional. It isn’t a skill nor a profession, it just means a person has interacted with at least one startup and gave an opinion. For your own sake, don’t use “mentor” on your profile title or professional experience. People should refer to you as a mentor due to good advice… it’s weird when you label yourself.

Low-touch mentorship is not advice, it’s exercising opinion
Meeting a founder one time and saying whatever you say doesn’t qualify you as a mentor. Real mentorship requires knowing your mentees well, developing trust and anticipating how they will react to pressure so you can better ponder your advice. Founders claim that mentor opinions are often contradictory, finding themselves in crossroads when deciding what to do.

Do not mentor out of interest
Review your mentoring wishes and principles, and question how much this act of giving back is helping amazing founders or just helping you with future consulting opportunities. Even if you are looking for investments, do not try to create a dependency on you. Mentoring should happen because mentor and mentee feel good exchanging ideas and exploring innovation. Good startup results are the goal, not the mentoring itself.

Founders listen to people babbling
Out of respect, early-stage founders spend time listening to mentors. Either in acceleration processes (mostly pasteurized meetings with a “partners network”) or pitch academies, there’s a lineup of mentors waiting. Over time, founders realize some “mentoring” patterns (I’ve made some of those mistakes at the beginning):

  • “I don’t think this business is gonna work”
  • “You should stop doing [present business model] and start [far-reaching idea]”
  • “Congrats, I think your business has great potential! Good luck”
  • “These guys [shows phone screen] already do what you do”

In other words, they’d rather babble than help the founder.

Founders should prioritize the best advice
Dear founder, don’t waste time with dozens of mentors. Say no to forced mentoring sessions on which you can’t see value. Focus on the ones that structure their feebdback, provide high-touch treatment and track your results over time.

You may guess VCs are excellent mentors, and they might be. However, they are too focused on their work and rarely provide consistent feedback over time. Find experienced founders who have executed operations that look like yours, listen to them and then ask for whoever they recommend.

For mentors, instead of the mentor badge, add your skills and market specialties to your profile title. You will help founders consider if you may be a suitable advice source. If that happens, please engage and use your candor the right way.

Want to hear my view on mentoring? Check out this post.

The Lean You: Pivoting your New Year’s Resolutions

This one on a personal note.

I stopped blogging for some time not because I had nothing to say, but because I had something cooking on my back burner…

I saw no point in writing about waste in startups and venture capital while carrying waste on many aspects of my life.

Being rational and pragmatic as much as I can, that small discomfort gradually took the form of a black, evil dragon puffing heavy hot breath over my back. I felt I had to straighten some things out: I’d be a sloppy incoherent piece of the cosmic machine if I weren’t able to change what’s inside my reach and control.

I learned and did a lot in this process (and that includes losing 40 lbs over 6 months). Hence, as the new year approaches, I’d like to share some of my findings in a language you’ll understand: under the light of the lean startup principles.

#1: Throw away your New Year’s resolutions

They mean nothing, and you’ll fail them anyway: they’re assumptions of what you feel or think you should do to become a “better” person, not what you really need.

Like startup founders who still don’t know the real needs of their end customer, we devise our own feature wishlist and decide that’s what we’ll pursue in the new year.

Don’t. There’s a better and more efficient way (a bit harder though).

#2: Find your real pain.

Finding your real pain is a tricky process. I refer to something really crooked that bothers you, not a problem with someone else. Most people know this pain very well – “I’m too fat” and “my marriage sucks” are faves to many of us.

There are also people who disguise their pain with other problems that keep them from fighting their real issues. This may sound harsh, but if they were startups, that behavior says only one thing: they deserve to fail.

So what is your most critical pain? What is the most desired feature you need, so you can live your life to the fullest? Pick only one thing to iterate on, and make sure you pick the right one. Humbly and sincerely asking people close to you about your strengths and weaknesses will help generate a real feature wishlist.

#3: Pivot your way towards your MVY

Forget the new year as a solid cycle, a pre-formatted timeframe. After all, you may need 3 years to solve only one thing, or just a couple of weeks to solve a lot of small stinky problems.

Think sprints. Picture your weeks or months as lean startup iteration cycles. Build – Measure – Learn over your assumptions and start building your MVY – the Minimum Viable You.

What is the most critical assumption to be validated first and foremost? For example, “People will value me if I dress better” and validate by measuring “If 7 out of 10 strangers treat me better when I’m slightly overdressed”.

What changes and tasks you need to make/perform to achieve that person you envisioned with the help of your customer? (i.e. your trusted people circle)

If you validate that the fresh new you (the present MVY) isn’t working and pleasing people and/or yourself, pivot. Find another assumption and restart the cycle.

#4: Painlessly drop the wrong assumptions

Here’s what this process will teach you: people might not like you better if you embody that theoretical new You previously envisioned. You might not like it… So you may feel those changes were a waste of time and effort. Good! That’s the spirit: you won’t dwell inside forever, and will simply drop the wrong assumptions.

Find the real pain and solve it. You should become a better version of yourself. Do or do not, there is no try.

Happy New Year!

Time is our most valued asset and the most precious gift we have, so don’t waste a second by cheating on yourself and denying a better life for you and yours.

Over the past year, I became a better father; lived longer, healthier, and more productive days; increased my focus on what’s important. It took me a continuous systematic approach that isn’t different from the lean gospel we already preach.

In other words, don’t talk the talk – walk the walk. Have a great time iterating towards a better you!

The Fallacy of the Exit

Recent news on the write-down of unicorns, IPO scarcity, and what’s to come next show it’s hard to win in venture capital, and that’s why eyebrows always raise when an investor exits a startup. However, if you didn’t figure it out yet, there’s a fallacy behind exits.

Behind the mirror

Venture capital is essentially a business of failing – but failing the less possible. This fundamental principle is connected to lean practices and the reduction of waste, though incredibly dissociated from the modus operandi and public assertions of the average VC.

Regardless of their M.O., VCs like to boast about their exits. Those exits, sometimes brilliant and profitable, are often an overestimated solution for a bad execution. So when you hear “we exited for an undisclosed amount” you may be hearing “we were bleeding money and sold for pennies”. There are exits and emergency exits.

Take a write-off, which is giving back invested equity for nothing. Whenever a VC goes public about a write-off, the implicit argument is often “we tried all we could, but you know… founders screw up.” Only write-offs are waste: they’re the consequence of overpricing and underperfomance combined – not one or the other. Here’s why: write-downs (investing more money for a lesser valuation) are usually the late consequence of bad funding decisions, and a lot of write-offs are write-downs that became unaffordable. Hence, The VC is as guilty as the founders (but magically excused).

This is why VCs sometimes welcome bad (undisclosed) exits as tools to achieve three things:

  • Good publicity, signaling solidity and success for the press.
  • Impress investors, making it easier to raise the next fund.
  • Partial payback, so bad investments can return part of the debt.

It’s also why you should respect any investor who says “We made a mistake” after an exit or write-off. But it can get worse: sometimes bad exits don’t even pay a fair return to founders.

Reason, not looks.

Most founders believe all investors match the same greedy archetype, but that’s far from the truth. There’s a (varying) bit in all of us that believes in empowering entrepreneurs to change the world, and be part of that story.

Despite of our personal motivation, angel investors (and sometimes early-stage funds) differ radically from big fund managers in one thing: the first manage their own money, while the latter mostly manage other people’s money. Typically overlooked, that aspect is key to determine their investment decisions and how they plan towards an exit: when you manage your own money, emergency exits are waste and unaffordable. They’re (again) bad investment decisions that shouldn’t have happened in the first place.

That’s why sometimes exits are just for looks.

Panem et Circenses: An Investment Thesis Inspired on Pagan Rome

Decimus Iūnius Iuvenālis must have had a full life. He was the poet who wrote the Satires, criticizing Rome by combining comedy and wit around 100 A.D. As a teenager, I read some of Juvenal’s work out of pure curiosity, enriching my premature codes of conduct with two expressions full of meaning:

  • mens sana in corpore sano: “You should pray for a healthy mind in a healthy body; Ask for a stout heart that has no fear of death (…) What I commend to you, you can give to yourself; For assuredly, the only road to a life of peace is virtue.”
  • panem et circenses: “Already long ago, from when we sold our vote to no man, the People have abdicated our duties; for the People (…) anxiously hopes for just two things: bread and circuses”

The first has helped me follow a peaceful and righteous track for life. The second helped me understand the relationship of power, money, and the behaviour of the masses. But it was not until lately that I realized: panem et circenses can directly impact my investment decisions.

Here’s why.

First, some context.

A much deeper discussion is justifiable, but I’ll simplify to save time: when Juvenal was alive, the gladiator battles reached their peak, and any politician who sponsored a great spectacle would be reminded on coming elections. When those came, families received substantial grain portions from those who ran for Senate. Rome even tried to pass anti-corruption laws that refrained those tactics, but failed miserably. The common people no longer cared for history, politics, or heroism: they wanted food on the table, and some fun to forget the daily struggle.

What changed?

The average consumer, the one startups fight hard to conquer, is not very different today. Humans have not evolved too much, and most of our everyday decisions are unconsciously-biased and highly influenced by how quick arguments have been molded to win us. Believe me, there are hundreds of books about it 😉

Whenever I discuss a business model twist or analyze a new early-stage product, I think about panem et circenses and try to broaden its reach. This way, I can see how that startup will bring two sets of things to the user’s table:

  • Panem = food. Money. Complementary income. Goal achievement. Self-education. Food for thought.
  • Circenses = fun. The ability to bring fun to others. Sense of belonging. Self-deception. Happiness.

Those two lists go on and on, and I could write pages about those concepts. I’ll keep this post short and leave the interpretation to you, because it all boils down to this: if a startup is directly marketing and delivering at least one of those concepts properly, even if not explicitly, a further look is granted. It may be able to solve two pains we know are common to everyone.

Practice this on the next potential investments you face. Let me know how it works for you.

Preparing Startup Assets for a Future Exit

My last post allowed for some interesting discussions AFK. A particular one involved a roundtable of investors and entrepreneurs regarding three main topics:

1) who am I to propose a new definition for anything
2) what are the typical derisking practices any startup can use
3) how business assets and real options relate to startup strategy

I believe the latter deserves a deeper discussion, so writing this post helps me get rid of that burden.

Business Assets Can Be Planned from Scratch

Remember that time you were drafting your Business Model Canvas and felt kinda clueless when filling the “Key Activities” and “Key Resources” blocks? That’s you right there and then, still immature and unsure of what can be the most important assets of your early-stage startup.

The harder you think ahead those resources and activities, the better your view on what is really valuable for your business. The processes and resources that only your startup can develop and improve – really, only your startup – are not only the pillars of your business, but also the things that support your true value proposition. They are your most precious assets, and have to be polished until they are the very engine that differentiates your business from all others – then, scalability and repeatability may be only natural consequences.

Consider anything that may be of great value in a startup: a killer algorithm, a secured patent, an incredibly loyal group of early adopters, or a founding team who will create the next big thing. The end consumer sees only the consequence of that: the service provided by the startup. The key assets of a startup are useless if they haven’t been proven critical to materialize the business, whatever importance founders brag they have.

Invest time planning ahead for your startup’s most important business assets.

The Best Business Assets Become Real Options

Real options can be defined as the alternatives that bring management flexibility. The concept is not commonly found on the vocabulary of entrepreneurs, but is widely used in venture capital and private equity. When a startup consolidates a product, achieves tactical or strategical advances for its assets, or simply marks the territory with a positive market move, it may be buying flexibility to pursue new future directions for the business.

For early-stage startups, real options are like breadcrumbs you leave behind when you pivot: they are backtracking paths you can follow back if everything blows up on your next move. It is so because when you’re grasping towards validation, it’s very hard to see farther than your closest objectives – and they’re often more tactical than strategic. When you leave plan-Bs around, it’s much easier to secure previously abandoned directions that are now promising – compared to the disastrous pivot you just spent months on trying.

If handled carefully, an unsuccessful pivot may be pocketed and saved for a better time. And as startups mature, the planning for real options can help prioritize on where to pivot next.

Startups: A Remixed Definition

Startup acquisitions usually involve one strategic business asset or real option. The most common are:

  • Client portfolio, mostly in B2B startups and important to big enterprises that wish to expand to the longer tail of revenue profile.
  • User base, mostly in B2C startups that present an above-average user growth – an example is Whatsapp, that grew in 4 years what Facebook took almost 10 years to grow.
  • Growing revenues and/or profit, simply because it’s cheaper to buy now a startup that’s growing fast than after it has grown even more.
  • Geographical dominance, mostly when a global startup is expanding to a new country and it’s cheaper to acquire the local leader than to invest in a regional operation from scratch.
  • Patents or products that are technologically advanced and provide the buyer an open path to diversify, or to make a strong stand before competitors.
  • A killing team that may operate a new business unit and oxygenate a big company wishing to innovate.

If you’re a startup founder, analyze the assets that will become one of those exit motivations. If you’re an investor, forward this post to your invested founders. Remember: in the startup game, it’s all about strategy.

To close the post and reinforce the sentence you just read, I’d like to come out with a remixed definition of a startup, coined after a late night conversation:

Real startups are investment targets that develop and secure unique real options faster than my next raise

Can’t say I disagree.

Redefining a Startup: an Investor’s Perspective

A lot has been said about startups, and words of wisdom from countless experts, entrepreneurs, and investors have collectively built dogmas accepted worldwide. Steve Blank and Eric Ries are two consistent contributors of that knowledge body over the past decade, and their joint definition of a startup could be stated as this:


A startup is a temporary organization in search of a scalable and repeatable business model, designed to deliver new products or services under conditions of extreme uncertainty


Blank’s words before the comma, Ries’ right after. Beautifully complementary definitions, self-explanatory, and polished to perfection. But even so…

Interpretation is subjective

I’ve been approached by thousands of entrepreneurs looking for funding, and I’ve preached that same complete definition in response. Strangely, their typical reply to my gospell always denoted a lack of understanding on what exactly the terms on that definition really meant. This is why I always felt the need of a definition that tells them how to assess themselves as a true startup or not, and also to help them visualize startups their right path through investor lenses.

I’m not aspiring to pivot the original concept, just flip that definition coin to reveal what could be engraved on the other side. And this is what I came up with:

A startup is an organisation intended to derisk and maximize the value of business assets in record time

Let’s break down the key concepts.


Startups aren’t necessarily a formal company. On the other hand, we often find independent teams inside big companies working with a startup mindset. Therefore, organisations comprise groups of friends / researchers / professionals, recently incorporated businesses, teams inside big companies, using part-time or full-time schedules towards a common goal: create a startup together around the same product or service, either inside a company, as a spin-off, or as a formal company.


No matter how uncertain the product/market fit or how innovative the business model, investors have a bias towards lower risk and against extreme uncertainty. Hence, the best startups combine gradual decrease in risk probabilities with a consistent increase in potential returns. Great startups derisk their success over time, and the best way to do that is grow, grow, and grow… In addition, many risk factors can be detected, acted upon, and minimized with careful planning. Legal protection, patent applications, commercial partnership agreements, NDAs + non-compete signed with big competitors, letters of intention from potencial buyers, anything that can make sure a startup gets future revenue or has a safe harbor when / after launching.

Maximize the value

There is no purpose in a startup that doesn’t aim to increase its value, and that purpose is less rich and noble in proportion of how much waste a startup generates. When one stands for maximizing the value of something, it means to reach the utmost value one can achieve – and not accepting less. Founders who maximize the value of their startup assets stretch their bones in a daily fight to extract everything they can from their team, technology, management, and results.

Business assets

Any asset can be valuable in a startup, such as an innovative technology, a massive user base, a great founding team or a single approved patent. Even so, those assets are only attractive to investors and executives (as representatives of funds and enterprises) if they have a business application and provide competitive advantage to someone working the market – present or future. After all, if the startup’s business model proves not to be scalable and repeatable (or the management screws up), you can still liquidate those assets and get huge value in return…

That is a key aspect that armies of entrepreneurs forget or underestimate. Investors will only have their equity valued in 10x if founders are working hard to turn assets into business assets. Executives will only vouch for a startup that presents strategic features, technologies, customer base or teams that are usable in a turn-key fashion, or very close to turn-key. If startup S1 has less valuable assets than startup S2, but assets are more business-ready on the first, it may win the race.

Consider any kind of exit as a plan B, but as important as plan A: not ever needing an exit. Maximizing the value of business assets is mandatory on both scenarios.

Record time

Not much to explain here: a startup has to execute and grow as fast as it can, and much faster than its competitors. Be it swimming, racing, or whatever endeavor humans undertake to achieve greatness, record times are hardly broken (though some people struggle their whole lives to break those). It works the same for a startup: growing in record time means one is faster than all others.

Use it as a compass

How many entrepreneurs are able to fully abandon their biases, personal beliefs, and prejudices in favor of creating the best startup they can? Even though most startups are presented as potentially scalable and repeatable business models, that is frequently a premise and not a validation. In other words, entrepreneurs very often hammer their startup vision onto anything they see, because they believe they’re pursuing a scalable model – and not because it indeed is or will be. Unfortunately, Blank’s and Ries’ definitions allow that plausible mistake to happen and don’t hint on how to close that gap (not unless you look at all the methodologies / practices they’ve thoroughly described on their books and blogs).

My proposed definition serves as magnetic north to founders or corporate teams who wish to understand their potential return on investment. But most importantly – despite being funded or not, formal or informal – they can look at that compass, self-check if they’re off-course, and understand how much of a startup mindset they really have.

So if you’re running a startup, occasionally go through the checklist literally derived from the definition:

[    ] Are you actively working to derisk your startup?
[    ] Are you maximizing the value of your assets?
[    ] Are those assets business-oriented?
[    ] Are you doing all that as fast as you can?
[    ] Are you doing all that faster than similar startups?
[    ] Are all your actions, everyday, planned to answer “Yes” to all questions above?

Each negative answer to those questions screams “you’re not running a startup”. Are you? Then follow this recipe:

1. For every negative, ask the team “Why not?”
2. Write down the real reasons
3. Devise simple solutions to address each reason
4. Make it work.

I’ll tell you what: whenever your reason is “we don’t have enough money”, think of another reason. Every startup needs capital, but the best ones find alternatives that transpose those obstacles even without funding. And always remember… startups may not be your thing.

Getting it right, it’s like building a strategy SCRUM board. Believe me, it pays off and will make you a better founder everyday.


The Secret Behind Stripe’s Atlas: Onboarding as a Service

With no previous hustle, Stripe suddenly unveiled Atlas to the world – showing how it can support foreign companies in speeding up their process of becoming an American operation, and quickly start charging with Stripe. The selected companies won’t need to address complicated issues such as incorporating a Delaware company, reducing legal and financial risk, and getting US$ 15,000 in infrastructure credits from Amazon. Stripe will provide all that for only US$ 500.

The question in everyone’s minds was “Brilliant! Why hasn’t any e-payment platform thought about this before?”. However, this is an end-user perspective. What Stripe is really doing, from a company perspective, is trying out a simple idea that can drammatically shake a startup’s world: Onboarding as a Service, or OaaS.

Onboarding: soothing users in

Every business needs a constant stream of new customers. The fastest they understand the value of a particular product among its competitors, the highest their potential as future loyal customers. You can’t love a product you don’t use, and won’t advocate for a service you don’t love.

The process of soothing in prospects and leads and trying to transform them into customers is called onboarding. On most startups, onboarding is delegated to the marketing team – either integrated with an inbound channel or sales representative. There are several tactics to increase efficiency on this process – such as lead scoring, top-of-funnel content marketing, and others. What Stripe did different was finding a key pain point of its prospects and create a multidisciplinary team to give them what they need. By packaging processes that are usually done offline, Stripe offered something considerably valuable for practically no cost.

What startups can learn from Atlas

Stripe knew about this pain point for a long time, but most startups aren’t aware of all the small things that prevent prospects from adopting their product or service. That understanding only comes as a consequence of a thorough and strategic analysis that is (maybe) easier for unicorns than for earlier-stage startups.

For Atlas, Stripe gets a US$ 500 deduction to its CAC (Customer Acquisition Cost) whenever a customer is selected. The secret then lies in three key issues:

  • The costs and expenses (from the onboarding team salaries to the incorporation expenses) have to be paid for in the future, and the partner credits (such as AWS’s) help increase the value of Atlas without additional costs
  • Controlling the growth scale, so the OaaS won’t need constant boosts of HR to comply with the lead demand
  • Making sure the drop rate isn’t high, and that the LTV (LifeTime Value) of the Atlas customers by far surpasses their CAC

Stripe solved those with an invite-only format. The result is (probably, since I don’t have access to numbers) tens of thousands new international leads in only a couple of days, for the cost of a conference participation… Another result is that the company doesn’t have to release Atlas adoption metrics unless they’re very good (after all, it’s a beta service and invite-only). And the most beautiful thing of all: Stripe disguised an intricated onboarding internal process as a value-adding service that solves a deeper layer of its very own problem/solution fit.

OaaS strongly justifies itself when a startup wants to diversify customer segments, expand geographically, or just increase market reach. What I believe: any startup should use Stripe’s example to devise their own OaaS strategy and kick competition in the ass. Now think, no matter the stage of your startup: what is your OaaS MVP?

The Doom of Twitter And The Innovation Chasm

As we watch celebrities defend their honor and make millions just by typing stuff on Twitter, others discuss whether Twitter is doomed or not, and there’s constant hammering on that. But besides Kanye’s and Oprah’s, other tweets have been particular interesting for founders and VCs over the past week. Paul Graham triggered the discussion, apparently unintentionally:

“Startups: instead of appearing on Shark Tank, spend that energy fixing whatever makes your product so unappealling you think ou need to.”

Then a long thread followed, curated below to make your life easier:



PG’s remark on product and Dave’s polite reply are the tweets that motivated the blog post you now indulge me by reading, because they show that even people who live and breath early-stage venture capital disagree on what are the most fundamental strategies towards growth or doom.

Twitter might be doomed, but that real-time debate might have never happened if it wasn’t out there. So could we assume Paul Graham is right, and getting the product right may be what’s dooming Twitter? Or is Dave right, and it’s a great product that’s not marketed properly? Maybe they’re both right? Or wrong?

Way Beyond the Chasm

“Crossing the Chasm” by Geoffrey Moore became the innovators bible in the 1990s, later followed by “Inside the Tornado”. Both books digress on the same theme: the life cycle of innovation and technology adoption. I’ll speak Startupish for a quick review:


  1. Funded or not, every startup gathers a small crowd to try an MVP. Usually those innovators are looking for new trends and use the product at their own will, but some may have been handpicked by the founders to give feedback.
  2. When the early adopters hear about it and start showing up, the MVP is probably shaping up as a product – but the founders didn’t quite get it right yet.
  3. The innovation chasm is the gap every startup has to cross if it wants to get to the common people, pivoting back and forth across different customer segments to refine its problem/solution fit – Moore calls that process the bowling alley strategy. The startup then ups the pace to accumulate its first million users, and that fast-growing bunch of signups is called the early majority).
  4. The tornado is the relentless chaotic period where the startup strives to find product/market fit and grow way past its initial traction. Getting to main street means everyone out there is using the product, and some time later, their moms and dads as well. This is when the addressable market starts shrinking.
  5. The end of life approaches when the haters have silently been beat and start using the product as well. There’s not much market left to conquer. It must diversify or expand geographically, if it wants to keep growing.

Let’s give Moore a try and throw Facebook and Twitter against that graph. We’ll see they stick in different places: Facebook is definitely approaching the end of Main Street, but it didn’t stop the bowling alley strategy: it has no shame and keeps molding the product here and there to better fit advertisers, small companies, grandpas, and different mobile transfer speeds.

Twitter, on the other hand, chose to be an intelligent and minimal product that covers a major need for real-time information, but still respect you enough to let YOU decide what your timeline shows. It went all in with promoted tweets and other revenue experiments, but is still reluctant to get to full Main Street because of core changes that might have to be done. Maybe it’s just… not made for everyone.

We’re all doomed

So in the case of Twitter and at the light of the Innovation Chasm framework, Paul Graham may initally seem the one who’s right: but the key issue of it all is a product premise, not a product misfit. That means it’s a strategic problem, not only a product problem. Twitter chose to remain Twitter, and that’s costing them the market. It is a better product in terms of design and user experience, while Facebook sacrifices the product essence in order to maximize the stickness x monetization x audience equation – and the Twitter audience is not as broad.

Twitter is not doomed, because it can still decide to try out various business models without changing the product. We ourselves are all doomed, because Facebook – a massive black-hole of attention – is winning the current race. In respect to its social stream business, Facebook completely tilted towards money: video auto-play, timeline curation, cluttered interface, and destinated the whole user experience to maximize revenue. Twitter, on the other hand, kept its soul. We love it for that, but our grandpas will never get it. And grandpas are (respectfully) cattle for Facebook’s revenue model, since if you’re not paying for it, you ARE the product. Not me – I’m not on Facebook.

Instead of the typical click bait on your Facebook timeline, I daily restore my faith in mankind because of Twitter.

Maybe millions of users such as myself – the loyal Twitter early majority – would be willing to avoid another orphanhood like we had with Google Reader by paying a few bucks every month to keep using Twitter as it is…

Or maybe we should just shrug, facing the helpless and neverending dilemma of great-product / not-enough-revenue.

On Startup Metrics and Picking The Right Investment

Controlling the right metrics is one of the indispensable features of a great founder. Management by numbers is key for growth, and critical in adapting a startup operation along its quantum leaps of scale. However, we can’t predict when your path as an investor will cross the path of a founder who have already reached that maturity… so the question becomes: since scale is the trigger for better metrics, how can we detect a precocious number orientation in a pre-growth startup?

Numbers don’t lie

You may want to read Semil’s recent take on how investors should spray and pray versus be picky. It’s a very good article, and this particular quote had me wondering:

So, is it just “spray and pray?” No, that is too easy. It’s about branding for deal flow, about securing the perimeter for coverage, about staying close to your companies and helping out, and having the financial access, right, and flexibility to follow along into subsequent rounds as the best companies emerge

The best companies emerge, he said. As an investor, how can you be there before it happens? This situation reminds me of Mark Zuckerberg right after the IPO, when asked about Facebook being overpriced. He said the company stock was undervalued and that it was a great opportunity for people to double down before it went up. Only he and the Board had the real glimpse of how Facebook was going, and that was because only they knew the key growth metrics. You can only price well what you measure well.

The deeper and faster you get into the metrics of a potential investment before closing a deal, the better are the odds to make a good decision. This looks like an obvious conclusion, but you’d be amazed that many investors don’t know which metrics to analyze. Doubling down is significantly de-risked with real numbers (even if they’re still small), and this is why I’m picky on metrics and dedicate long hours to make them right. Good metrics are a collateral benefit of a good strategy.

Startups are a tool to build scalable businesses, so you’re not looking at a “role model startup” if you don’t get the numbers – and role models are the only ones worth investing in. Even when there’s not enough operation history, the proper metrics are mandatory and key for a VC to evaluate the business evolution.

Using a simple analogy, startup founders who don’t know their metrics are like slow drivers on the fast lane: they should either go faster or pull to the right. The ones who drive faster and measure their way are still on the race; the slow drivers who don’t measure performance are thinking about something else than the race – and startups are all about winning that freaking race.

How to pick them?

Instead of focusing on the metrics themselves – because they vary according to the business model and there’s extensive online content on that matter – this is how I assess founders and startups with a simple framework and four levels of metrics maturity:

  1. they have no idea (or are uncertain) of what are the right metrics for startups
  2. they know the fundamental principles for startup metrics, but don’t know which ones to pick
  3. they know which metrics are the best for them and do perform measurements, but didn’t create a routine evaluation process
  4. they implemented an automated dashboard and the business is constantly refined according to the right measurements

This way VCs can easily prioritize the deal flow with one single objective criterion, instead of looking in the mirror every morning and pinching themselves thinking how unbelievably good they are when picking investments. Startups scoring 3-4 should be looked into before others. The higher the investment round, the closest they need to be to 4.

One might argue there may be excellent investment deals out there who operate under the radar, run kick-ass products but still didn’t figure out the right metrics. Well, considering the amount of information on the subject, that would be as condescending and contradictory as listing good VCs who don’t guide their strategies relentlessly and insanely by their own performance metrics.

We’re constantly being reminded that seed-stage valuations are reaching all-time highs. Check out the Q3 2015 Halo Report to understand why. I believe the proper intepretation of metrics reduces venture capital waste – but you need to be sharp on which ones to look into.

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