How VCs Make Decisions; Startup Marketing Manifesto and The Data About Super Founders
Curated newsletter for founders and investors about the startup world. Issue #002
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What’s for Founders?
01 - New survey on how Venture Capitalists make decisions
Few deals happen without connections. 30% come from leads from VC-network, 20% from other investors’ referrals, and 30% by VCs initiating contact w/ startup.
Founders are the most important factor in decision-making - they were cited by 95% of VCs, followed by business model (74%), market (68%), and industry (31%).
Many VCs disregard traditional financial evaluations, e.g. DCF. The most commonly used metric is cash-on-cash return, followed by IRR.
Our survey found that for each deal a VC firm eventually closes, the firm considers, on average, 101 opportunities.
Among others: Professors from Harvard Business School & Stanford
Note: Almost 900 VCs participated in the survey, making it the most comprehensive to date
02 - Three types of advisors you might not have thought of
“I’m Going To Recruit You Down the Road”: When senior candidates are interested to join but not ready to leave their job yet, tie them to your startup as advisor.
“Set Up My Functional Leads for Success”: When hiring talented people early in their career, don’t worry about their lack of experience - give them a mentor.
“Customer Council”: A marketing-advisory board with 3-12 people from your industry for networking, press quotes, product feedback, and more.
I’ve also found that during recruiting process telling high-ceiling talents that they’ll get an ‘advisor equity budget’ to bring people closer to the company who can be useful is a signal of trust and agency that helps close them.
- Hunterwalk, Partner at Homebrew
03 - Startup marketing manifesto by Greg Isenberg
Create the “luckiness” feeling among your customers - lucky to be part of your community, lucky to buy your product, lucky to be part of your story.
“What we stand for” matters more than ever. Tell a great story around your values and be emotional to create connections with your customers.
Don’t spend your budget on large influencers but partner with microinfluencers. They reach fewer people but cost less and have more credibility among followers.
100 true fans is the new 1000 true fans. You don't need customers. You need hardcore customers. Find them first, and then you'll find your customers.
- Greg Isenberg, CEO at Late Checkout
What’s for Investors?
01 - Super Founders - what data reveals about billion-dollar startups
Competition is not an extinction risk - the majority of billion-dollar startups had strong competitors on day one.
Many founders didn’t personally experience the problem they’re solving - their ideas were opportunistic and characterized by clear product differentiation.
50% have over 10 years of work experience. While the overall work experience matters, most unicorn founders did not come from the industry of their startup.
Souper Founders are founders with at least one previous exit over $50M or whose company generated/is generating $10M+ Annual Revenues. Paper valuations not to be included.
- Ali Tamaseb, Partner at PCVC
Note: Author Ali Tamaseb extended this research, which will be published in his new book.
02 - 2021 CMX Community Industry Report
Community teams are growing: 67% of organizations had at least 2 full-time employees, 88% at least one dedicated community manager (2017: 71%)
Organizations see the value of communities: 86% agree that community is critical to their company’s mission and 69% will increase their investment in 2021
The main challenges are quantifying value, consistently engaging members, and dealing with a large number of efforts that are manual and not automated
My advice to anybody in the community business is, cement it now. Start working now to make sure you’re telling a story, delivering value, getting buy-in. The people investing today in cementing community as a valuable business practice are the ones who are going to win.
- Brian Oblinger, Community Expert and Strategic Consultant
Note: Cofounder of CMX, David Spinks, has also written a book on communities out in March
03 - Are sports cards the future of retail investing?
Sports cards are one of the first assets of the “third wave” of fintechs: Companies function as marketplaces where consumers can digitally trade private assets
Reasons for the hype: (1) cards are a hobby but also financial assets (2) FOMO due to the spike of Bitcoin (3) scarcity effect triggered by producers
The authors argue, there will be multiple $1bn+ companies with platforms that democratize access to different types of alternative investments beyond cards
A new class of retail investors has been mobilized, and they’re looking for investment opportunities. We’re excited to see who will ride this third wave of consumer fintech to build a category-defining company!
- Justine and Olivia Moore, Venture Investors at CRV
What else is worth your time?
Twitter | Twitter announced paid Super Follows to let you charge for tweets. In addition, a new feature called Communities will allow the creation of groups.
LinkedIn | LinkedIn develops a new service that allows businesses to hire freelancers. The new service is called Marketplaces and is supposed to launch in September 2021.
Disney | Disney has recycled entire scenes and shots from one animation movie in the other. Conclusion? Stop reinventing the wheel.
Google | The most successful YouTube Ads 2020 in Germany, led by #LikeABosch. Metrics: organic reach, audience engagement, and the ratio of likes vs. dislikes.
Naval Ravikant | Naval was on Clubhouse on February 22 - a Twitter thread has compiled his most interesting statements.
Yuval Noah Harari | Lessons learned from a year of Covid.
Book: The Making of a Billion-Dollar Athlete
In the book The Making of a Billion-Dollar Athlete, Brian Windhorst offers unique insights into how LeBron James has become a global brand and billionaire sports icon.
LeBron surrounded himself with smart people that could open doors for him and execute his ideas. To grow his business and increase his credibility outside of basketball, he worked with advisor Paul Wachter who initiated multiple deals.
LeBron always had a long-term view and preferred equity over endorsement paychecks. With regard to a shoe deal from Reebok he declined, he once said:
I was going to be making a deal for life. You don’t think about the first check; you think about all of them. Lebron James
LeBron knew how to use his personal brand and leverage his fanbase. He always tried to control his brand perception and used this leverage to be diversified and invested in multiple niches.
Read more about LeBron James’ business and the lessons learned
Startup Idea: Salary negotiation as a service
Negotiation as a service is based on the idea: Only pay if you save money.
The most interesting example is Inside Car Buying: pay $499, tell them the car you want, and they negotiate a deal. If they don’t save money, you get it back.
Other existing services: (1) Mainstreet saves money by getting tax credits (2) Buyer saves startups money on software (3) Fixed fights your parking tickets.
Startup Idea: Service for salary negotiations. Among higher-income people, 5% more or less in salary can make a huge difference.
However, negotiating is often uncomfortable, and very few people are educated on how to do it. Therefore, they leave money on the table. In sports, for example, it is the norm that the player’s manager negotiates the salary.
Food for thought
You can’t connect the dots looking forward; you can only connect them looking backward. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. Steve Jobs
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