Building Systems; Advice from Netflix's Co-Founder & The Problem with Climate Tech
Curated newsletter for founders and investors about the startup world. Issue #003
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What’s for Founders?
01 - How Prematch tested its product without having one
Note: Prematch is an all-in-one app for amateur soccer which informs users about all news, results, and statistics.
The founders set up a landing page with basic information and a CTA to register as an early user by answering a survey and entering a phone number.
They contacted potential customers via DM on social media and used the phone numbers of those who showed interest.
WhatsApp Prototyping: To simulate the solution, they manually collected data about their customers’ clubs and sent it to their phones with trackable links.
In the final step, they visualized the user flow by building a click-dummy with all screens of the app and the onboarding process.
No idea is perfect at the beginning. Not even yours. It’s never been, even with Facebook, Airbnb or Uber. And come on, do you really think you’re smarter than those minds?
- Founders of Prematch
02 - HashiCorp’s Chief of Staff shares his playbook for building systems
Turn your important practices into systems, e.g. how decisions are made. Better systems allow for an environment where people can do their best work.
A system of goal-setting can be built on two components: sources of truth (definition of success, e.g. scorecard) and rituals (consistent practice to review).
A habit of writing to document decisions can be based on two documents: PRD (Problem Requirement Document) defines the problem, RFC (Request for comment) proposes a solution.
People can come and go over the years, but the systems they put in place and gradually refine over time become part of the company — and companies ultimately compete based on if those systems are strong or not.
- Kevin Fishner, Chief of Staff at HashiCorp
Note: The article contains several templates and is also available as a podcast.
03 - Advice for aspiring entrepreneurs from Netflix’s Co-Founder
Start now and start small; never leave an idea in your head. How to apply: Put your idea on paper, get over your fears, and get busy testing to identify flaws in it.
The magic lies not in the idea, it lies in the testing process. How to apply: Find a cheap and quick way to build systems that allow you to test and retest ideas.
Think long-term by focusing on what not do to today. How to apply: Focus on one thing today and become great at it before expanding into something else.
That’s the nature of being an entrepreneur. You’re prepared, and more interested frankly, in taking the long-shot at what could be a big success, rather than taking the safe route toward mediocrity, or more likely, failure.
- Marc Randolph, Netflix Co-Founder
04 - Every startup needs to select customers carefully
Focus your energy on the core client group. You should rank your customers, fire the troublemakers, and eliminate unfit ones.
Some key principles: (1) The right customer is always right (2) Underpromise and overdeliver (3) Don’t hide the secret sauce, share knowledge publicly.
Ways to fire a customer: (1) Prioritize the stars, push back troublemakers (2) Eliminate services (3) Raise prices.
Every smart entrepreneur needs to realize that trying to treat every customer the same, with limited resources, may mean that you are treating them all poorly, or at least limiting your own growth.
- Martin Zwilling, CEO & Founder of Startup Professionals Inc.
What’s for Investors?
01 - Exercises you can practice as you evaluate startups
Evaluate the startup’s learning efficiency - How much is the company going to learn for how much money and how quickly? The more a company can learn between capital raises the better the investment opportunity.
Spend time to really understand the team - Would a younger version of you be excited to work for a member of the Founding team? Why (not)?
Look for difficult accomplishments - Startups should be able to tell at least one story that borders on the unbelievable.
Answer the “Why now?”-question - Avoid the mental trap of founders who think that they are smarter than big companies and therefore they will win.
The challenge for startups is to crack the code on their value prop, user experience, business model and capture market share before incumbents wake up. Speed and unity of focus are a startup’s main advantages, not smarts.
- Frank Rotman, Co-Founder of QED Investors
02 - European investors are not yet prepared for climate tech
Opportunities are bigger than ever: $25b R&D capital provided by the EU while BCG estimates the total global investment to reach net-zero at $75tr.
Reasons that prevent significant climate investments from VCs: (1) pressure for fast returns (2) pressure for capital efficiency (3) lack of smart capital.
It seems that LPs understand the problem. To succeed, Europe needs larger climate-focused VCs and a transition toward data-driven impact reporting.
“We’re starting to see more evidence of climate change and its impact on capital allocation. I do believe that if you’re a long-term investor, you’d better frame all your investments through that lens.”
- Larry Fink, CEO of Blackrock
03 - Launch Factory - a venture studio that provides ideas and funding
Other than incubators and accelerators, venture studios identify startup opportunities before recruiting potential founders to grow them.
At Launch Factory, founders compete in teams over seven weeks to demonstrate their ability to lead a startup - performance is all that matters, no biases.
The winning team receives 66% equity, $300k seed capital, and a team of compensated advisors.
Launch Factory incubation provides tools and processes that allow founders to focus on their business and avoid common pitfalls, while a network of advisors and investors help to maximize each new company’s chances of success.
- James Hereford, COO and Co-Founder of Launch Factory
04 - Three trends that could curb the hype around SPACs
Capital could become scarce and expensive again when inflation returns and interest rates increase.
Tighter regulations with rules like there are for IPOs. Also, the barriers for IPOs could be lowered to increase their relative attraction.
SPACs could simply fall out of favor, similar to what occurred with crowdfunding.
SPACs are less of a replacement and more of a complement to traditional IPOs: an additional layer that contributes to amplifying the trend of more tech companies going public.
- Nicolas Colin, Co-Founder and Director of The Family
What else is worth your time?
YouTube | Short video from Peak Design highlighting the quality of their product and mocking Amazon for copying it.
Jeff Bezos | Why Jeff Bezos thinks it is more important to ask “What’s not going to change in the next 10 years?” than “What’s going to change in the next 10 years?”
Resident Contrarian | On the experience of being poor-ish, for people who aren’t.
Y Combinator | The story of how Jessica Livingston and Paul Graham founded Y Combinator incl. nine learnings of their journey.
Corey Quinn | Twitter thread about the pains and challenges on the journey of founding a company.
Reason to smile | “This is what makes America great” - Little girl dancing with a bus driver to Taylor Swift’s Shake it Off.
Podcast Recommendation
How the founder of Morning Brew deals with impostor syndrome
About 70% of people say they’ve dealt with the impostor syndrome. Mike Cannon-Brookes, the co-CEO of Atlassian, says it often comes with success.
According to Alex Lieberman, Founder of Morning Brew, the key is learning to work with impostor syndrome, rather than through it. Some things you can do:
Reframe the perception of an experience to be a good thing. Welcome the fear of failure as a driver to get better.
Use comparisons to your advantage. Normalize the experience by drawing comparisons to other successful people with impostor syndrome.
Write down provoking thoughts instead of obsessing about them over and over again to unpack your potential.
Food for thought
Almost everyone starts off extrinsically motivated to some degree.
- Sam Altman
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