Leadership Lessons from Bezos; Bottom-up Pricing; Indie.vc & South Korea's Amazon
Curated newsletter for founders and investors about the startup world. Issue #004
Hey there and welcome to our curated bi-weekly newsletter for founders and investors about the startup world. bloxx.build is Europe’s first professional community builder. We connect ambitious, bright minds and empower them on their journey of building something new. Our flagship program “Founding Ideas” connects experienced professionals looking to found a new venture and helps them with ideation, finding a co-founder and getting their first equity-funding.
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What’s new for Founders?
01 - Leadership Lessons from Jeff Bezos (written by Reid Hoffman)
Focus is the core of greatness. Bezos prioritizes future profits and expansion while following his key principles: more selection, lower prices, faster delivery.
Embrace management innovation. He doesn’t simply accept common beliefs but thinks from first principles - Example: Amazon’s writing culture.
Put data first. Simply put: If there is data, then data will determine the decision.
Create an environment where intrapreneurs could thrive. Don’t judge a project team on the result but the process and accept failure.
Over and over, he has gambled on products and product areas where no current market existed. Products like the Kindle and Amazon Web Services created entirely new markets, which Amazon now dominates or leads.
- Reid Hoffman, Co-Founder and former CEO of LinkedIn
Read more on Greylock - the article also discusses CEO succession
02 - How to carry out Bottom-Up Pricing & Packaging for B2B companies
Start with the user journey. The journey can be mapped into four stages: Organic use (Tier 1), Professional use by an individual (Tier 2), Multiplayer, collaborative use (Tier 3), Enterprise use (Tier 4)
Figure out where the money comes from. If it comes from the enterprise, lower tiers are usually free. If individuals are targeted, lower tiers are more expensive.
Test and iterate. Bottom-up is a high velocity, relatively low impact method for testing the right tiering and pricing. Talk to customer segments and A/B test.
The user journey is a critical guide for thinking through pricing and packaging for a bottom-up B2B product. Still, there are no simple or right answers, and unfortunately, many ways to get it wrong.
- Jennifer Li & Martin Casado, Partners at Andreessen Horowitz
03 - How to select the best fundraising strategy for your startup
Define why you want to raise money, which milestones you aim for. Then figure out where you are on the scale from small/medium business to rocket ship.
Understand your capital options. Keep in mind how much each option will cost in terms of equity and control. Small business founders will usually benefit from bootstrapping, grants, and debt; Rocket ship founders from VCs and angels.
Fundraising is hard. Full stop. What can make it even harder is not knowing the cap options your business is best suited for & chasing after money that may not be in your best interest.
- Lolita Taub, General Partner at The Community Fund
04 - How Zapier reached a $5B valuation without the VC ‘hamster wheel’
Zapier only raised 1.3m in funding, yet reached $140m in ARR by now. In January, original investors sold their shares at a $5b valuation.
Zapier focuses on smaller customers, often overlooked by large software companies, e.g. coffee shop owners. High margins led to early profitability.
Prioritize customer support. Zapier works closely with small customers and makes sure everything is running smoothly.
For us, we've always looked at financing events, whether they're primary, secondary or public markets, as a tool in the tool belt. It's something that you can reach for as a person who runs a business that can help you when you need it.
- Wade Foster, CEO at Zapier
What’s new for Investors?
01 - Coupang - South Korea’s answer to Amazon
Coupang’s stock market debut was the largest since Alibaba. Coupang is located in South Korea, one of the fastest-growing markets for online shopping.
Cheap prices and fast delivery - Coupang meets the most important customer needs. Workforce (50.000) and revenues ($12b) almost doubled last year.
Coupang operates similar to Amazon: Become a dominant market force before turning a profit. Its net loss of $1b in 2018 is funded by investors like SoftBank.
Our mission is to create a world where customers wonder, ‘How did I ever live without Coupang?’
- Bom Suk Kim, Founder and CEO at Coupang
02 - Enterprise & Deep Tech (E&DT) VC in Europe & Israel 2020
Overall VC investment in Europe & Israel in 2020: $45.6B - all of the increase in investment volume was in consumer while E&DT was down by just under 1%.
Most commonly funded segments: Enterprise Marketing Saas, Enterprise Financial SaaS, Enterprise Security Software
Southern Europe, Iberia, and BeNeLux are growing the fastest in E&DT. VC activity in Netherlands and Spain exploded in Q4 2020.
Trends: HR and retail tech show the strongest growth in number of investments. Industrial Tech, Data Tooling, and Deep Food-Tech companies are booming.
Note: Enterprise & Deep Tech includes: Traditional Enterprise, Small- and Medium-sized Enterprise (SME), Original Equipment Manufacturer (OEM), agriculture, government & telecom
03 - The end of Venture Capital Platform Indie.vc
Note: Indie.vc was founded by O'Reilly AlphaTech Ventures (OATV), an early-stage VC.
Idea: Indie.vc’s focused on sustainable - and often profitable - businesses that could use a capital boost but weren’t looking to hyperscale.
Problem: OATV’s Limited Partners were unimpressed even though funded companies were successful. Simply put: they wanted faster IRR growth.
End: OATV lost around 80% of its investors base when it announced its fourth fund would focus on the Indie.vc model.
The way the startup game is played, even compelling fundamentals take a distant back seat to how much money companies are raising, at what valuation they are raising it, and which top-tier firm is leading the raise. I tried to play by a different set of rules and got burned.
- Bryce Roberts, Co-founder and Managing Director at OATV
04 - Passion Capital will crowd-fund part of its new $62M fund
This is the first time retail investors have been invited to become LPs in a VC fund. Passion Capital will use the Seedrs platform.
£350,000 allocation will be made available to the public. Any investors who self-certifies as ‘high net worth’ or ‘sophisticated’ will be able to invest in the fund.
It will increase the diversity of the LP base. It increases inclusion and gives people more access. It just creates more participation and breaks down the old barriers.
- Eileen Burbidge, Partner at Passion Capital
05 - Emerging Investors And Their Value Proposition to Founders
Clearly communicate the benefits and features. Define what you can offer - both in terms of tangible and intangible resources.
Make the fundraising process as clear and transparent as possible. Specify what a good outcome is for you and what your expectations for the founder are.
Define how you can use your experience and leverage your network. Think about your brand perception and relationships you want to establish /w founders.
The goal is not to claim to offer everything to every founder profile but rather to identify your strengths, decide what you won’t do and clarify your position in the market.
- Miruna Girtu, Venture Partner at SyndicateRoom
What else is worth your time?
Pricing Strategy | How to add urgency to a purchasing decision in the digital world without any marginal costs
Media Habits | How 16-34-year-old and 55+ spent their commercial media time during lockdown - Spoiler: there was only 8% similarity, a significant fall from 58% in 2015.
Sahil Bloom | Twitter thread on bonds, yields, and the yield curve to explain the bond market volatility and its impact on equity markets.
Paul Graham | The beauty of writing simply.
Shaan Puri | How Instagram food accounts make $10M+ a year selling cookies.
Book Recommendation:
Thinking in Systems by Donella H. Meadows
Meadows argues that everything in this world is a system - whether it’s a city, animal, or corporation. Systems consist of three components: elements, interconnections, and purpose.
Changing elements (e.g. people) usually has the least effect. If interconnections change, the system may be greatly altered, e.g. basketball rules in football.
Putting different hands on the faucets may change the rate at which the faucets turn, but if they’re the same old faucets, plumbed into the same old system, turned according to the same old information and goals and rules, the system behavior isn’t going to change much.
Well-functioning systems are resilient, self-organized & hierarchical. Problems arise when different subsystems each have different goals. For example, drug traffickers and addicts want a high drug supply, the police want the opposite.
The key message of the book:
Everything we see, do and experience in this world is made of systems. While we cannot fully understand them, predict their behavior or exercise control over them, the least we can do is study the behavior and patterns they exhibit. Doing so will enable us to help them function better and identify when a broken system is in need of repair.
Food for thought
If you punish people for being wrong, they cover up their mistakes. They make excuses and throw blame to justify the past. If you treat being wrong as a learning opportunity, people admit their errors. They take responsibility for correcting and preventing them in the future.
- Adam Grant, Organizational Psychologist and author of several books, e.g. Think Again
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