Synth: Week of 9.28.20

From Alpaca VC:

From Lenny Rachitsky:

On Unicorns:

• “One in every 1,538 venture-backed companies passed this threshold ($1B valuation). That’s not a lot. It took more than seven years on average from founding to exit.” — Jerry Neumann, Betting on the Ponies
• “These are the two main VC strategies: (1) have a reputation of being the go-to investor in a certain type of company so you get first shot at investing in companies that are more likely to be unicorns; and (2) invest in enough companies that you have a decent probability of being an investor in the next unicorn.”

On Career/Life Planning:

• At 35 and a father of two (and aspiring wonderful husband), assuming I can pay my bills, my career north star should be this:

“Optimize for flexibility in your schedule and learning”

• If I do that correctly, I should have the bandwidth to be the husband and father I want to be while maximizing my skill set for my peak earning years in my late 40s and 50s.

On Flywheels and Community building (from Andy Johns below):

• “I believe there are four atomic units of a 1.0 flywheel”
• (1) Acquire: how users are acquired into the community (e.g. they sign up)‍
• (2) Consume: the mechanisms that drive content consumption (e.g. a newsfeed)‍
• (3) Create: the mechanisms that entice users to create content (e.g. social status)‍
• (4) Harvest: how new content created leads to more inbound growth (e.g. SEO)

On Social Media:

• Since I am careful with my “information diet” I always pay attention to my social media habits. Where I’m settling in is that I want to constrain my consumption of social media to the media where people are most accountable. That is, posting something on LinkedIn can affect your career. So, most people behave themselves. Twitter, kinda. Facebook, nope. So, aask me why I spend 99% of my social media time on LinkedIn . . .

On Net Estimated Value, by Nathan Baschez

1. Quantify the impact you think the project would have if it works. For example, you might have an idea for a new landing page design that you’d like to A/B test. You think it could boost conversions by 10%, and at your current scale that’s worth roughly $10k in MRR.
2. Assign a probability between 0–1 of it actually working. In this case, you know a similar design in a different landing page had a 10% conversion boost, so although it’s hard to know for sure, you feel reasonably confident in the idea. You think there’s a 50% chance you’ll get the 10% bump.
3. Multiply the impact by the probability to get “expected value”. So $10k MRR * 50% = $5k MRR of expected value.
4. Estimate the costs. You estimate it’ll take 15 hours worth of design and engineering effort to run this test, and as a rough rule of thumb you peg your team’s time at $200 per person/hour. So $200 * 15 = $3,000.
5. Arrive at a “net estimated value” figure. In this case, $5k MRR — $3k in costs = $2k “net estimated value” in the first month, and an ongoing 10% improvement every month after that (for as long as the landing page stays relevant).

On International Markets:

• What if you built out a venture ecosystem in Jakarta? If you buy the argument of simply having HUGE TAMs for startups, Indonesia is the 4th largest country in the world. You don’t have to deal with the politics of China or the rampant bribery and fraud in India. That would be a super-interesting international scale strategy if you had intimate relationships there. Just saying.

On VC Skills:

• It might be that the single most important skill set for a venture capitalist is ecosystem-building. That comes from brand strength and awareness.

On Angel Groups and Funds:

• I’m not convinced angels make REAL money. I know they can generate a return and I expect mine to do so. But I think that the real wealth generation isn’t about putting $10k into AirBnB’s pre-seed. I think it’s about putting $1M into their seed round.
• In that case, identifying winners is only part of the return story. Having follow-on capital is the other (arguably) larger part of driving REAL returns in venture. That only happens in funds or with extraordinarily wealthy people. Hmmm . . . .

Articles:

• Betting on the Ponies, Jerry Neumann
• In Defense of the IPO, A16Z
• Differentiated and Sustainable Biz Lending, Kunle
• Flywheels and How to Create Content Communities, Andy Johns
• Recurring Revenue: The Rise of an Asset Class, John Street Capital
• How to Make Yourself into a Learning Machine, Dan Shipper
• What it Feels Like When You’ve Found Product Market Fit, Lenny Rachitsky
• All Markets are Not Created Equal, Bill Gurley

Quotes:

• “We all could use a healthier does of humility when we are too flush with great man hubris. The world is richer and more complicated than we give it credit for.” — Eugene Wei
• “Good engineers don’t whine about trade-offs, because they realize that they’re the entire point.” — Seth Godin
• Software contracts are better than first-lien debt. You realize a company will not pay the interest payment on their first lien until after they pay their software maintenance or subscription fee. We get paid our money first. Who has the better credit? He can’t run his business without our software.” — Bob Smith
• “Throw on some Daft Punk and let’s get weird” — Not Boring
• “As war-based Massively Multiplayer Online Games (MMOGs) become more realistic and war is increasingly fought via drones, the skills required to be good at each are converging.” — Not Boring
• “I strive to be T-shaped: really good at something, but with a wide foundation” — Simon Eskildsen
• “Criticism doesn’t work in influencing other people. If you do not feel like being criticized, neither do they. You can gain others’ affection by understanding their interests. ” — How to Win Friends and Influence people (via Summerian)
• “Deal selection, on the other hand, is dictated by experience in pattern-recognition and the implementation of an effective, repeatable deal process.” — Alpaca VC
• “A true marketplace needs natural pull on both the consumer and supplier side of the market.” — Bill Gurley