1/ Saw this tweet from @DavidSacks and it prompted a bunch of thoughts.
There are are two types of co's that are facing a reckoning.
1. Tech-enabled w/o proficiency in cost attribution ("The WeWork/Uber effect")
2. Pre-PM Fit ("The YC effect")
There are are two types of co's that are facing a reckoning.
1. Tech-enabled w/o proficiency in cost attribution ("The WeWork/Uber effect")
2. Pre-PM Fit ("The YC effect")
2/ The "WeWork effect" proposes a real challenge for tech-enabled businesses where the unit economics and leverage from technology is typically unclear until you actually build the business, which often takes capital and time.
3/ The YC effect is a result of YC co's finding PM fit very early due to YC's effectiveness at getting founders to focus on PM fit and YC's popularity meaning more YC "seed" co's being further along w/ less capital raised.
4/ There are businesses, however, that struggle to get to this point because of the complexity of their product or service - @Superhuman, for example, could never have found PM fit that early.
5/ So what does this mean? Less investor attention to these companies actually represents a huge OPPORTUNITY for investors w/ conviction. There is so much seed $ on the market today and valuations are inflated everywhere. Find opportunity in co's that are out of style with others
6/ In the case of the tech-enabled business, you need conviction that the founder and approach can result in breakeven unit economics by growth stage - I agree w/ @DavidSacks here (h/t to @rabois on this).
7/ In the case of pre-PM fit businesses, you need conviction in the vision, the product, and the founder. Not enough investments are made on the backs of believing in a vision of the world as opposed to an "iterate and see what sticks" approach.
medium.com/@nealkhosla/on…
medium.com/@nealkhosla/on…
8/8 In both cases, the investors that win, as per usual, will be the ones that go against the grain, think for themselves, and show a tremendous amount of belief in a few exceptional companies.
