Time for another tweet storm! This one is about fast growth vs slower growth. And I'll start with a story about my friends.

Read on >>
1) In my sr yr of college, 3 friends got together to build an e-commerce co. In typical "noob entrepreneur" fashion (and I've definitely been there too!), they decided to start selling - call it product X - because they were just really passionate about prod X.
2) They didn't think about the COGs or margins. Or how wholesale works. Or sourcing. Or customer acq. They just knew they liked prod X. So they set up a website w/ a shopping cart. And started trying to buy product X in bulk and resell online.
3) Turns out prod X has really thin margins. And prod X is also a cheap prod - ~$3 to the consumer! So they would need lots of volume to make any decent $$. And would need to keep a close watch on margins.
4) Fortunately, my friends are super sharp & learned about business quickly & were able to keep a close eye on the margins. But they didn't have a great repeatable way to generating growth (the margins were too small to spend on anything)
5) Let's pause here. This was not a VC backable biz. The margins were low, so you couldn't take profits to re-invest in more growth. The value of the prod was also low, so even w/ repeat purchases, it would take a LONG time to generate a high LTV.
6) But is it a bad business? Ppl often ask me what I think of their biz, and I always have to clarify whether they are asking me if I think it's VC backable or if I think it's a good business just in general? These are 2 very diff things. Let's continue the story.
7) A yr or two goes by and it turns out they cannot support 3 ppl full time at decent salaries even though they have grown the business. 2 of them leave to get full time jobs doing something else for a couple years.
8) As an outsider, I was quick to erroneously assume, "Oh gosh. They are going to fold. How can they make this work?" Fast forward to today - 16 yrs later.
9) The 3 of them have rotated the CEOship over the yrs. They have all had a chance to pursue other careers AND all have been the CEO at diff times. The biz itself now generates millions in PROFIT per year. They have never raised external money.
10) The moral of the story is that if you build something ppl want & can get to unit econ profitable, in many cases -- even in the toughest of cases such as this -- you CAN make it work. But our typical frameworks usually prevent that. Now let's evaluate this.
11) My friends were able to rotate the CEOship & get to this pt 16 yrs later BECAUSE they took no outside money. VCs, in particular, are impatient & need to return capital to their investors on a 5-10 yr span. Many cos take 15+ years to really build.
12) VCs also are not able to do profit-sharing. Investing in an LLC would mean that we would need to profit share down to our LPs, and none of them want to deal with K-1s involving earning pennies every yr. But this team is able to profit share amongst the 3 of them.
13) So they don't need an exit. My friends have an annuity that is forever providing and growing as long as they do a good job. They also now have repeat customers who have been with them for a long time and are loyal.
14) Even if you cannot spend on growth (whether it's on hiring ppl or buying ads), there's still some level of baseline growth that will happen by sheer nature of just being around for a long time. And if you retain those customers (esp in subscription), that only compounds.
15) But again, not good for the VC model which is time constrained and format constrained. When ppl start their co, often the first inclination is to think "I NEED TO RAISE MONEY!" But really raising money - esp VC money - often removes optionality.
16) The right move is to figure out what is the lay of the land of the biz you have. If you are not happy w/ the growth trajectory potential after doing a lot of experiments, maybe you pivot to something that is potentially more VC backable (can have sustainable high growth).
17) But, if you like what you're working on & can see it solving a prob profitably - even if not fast growth, there's always a solve for how to pay yourself. Like how my friends rotated the CEOship. It's fun to come back to a familiar biz that is working when you are refreshed.
18) I think CEOs often throw in the towel too early. Because they're burnt out. Because it really does take a long time to grow esp w/ ltd resources, and when you're bigger & have profits, you can often get the flywheel going then & make it big. But it may take 15 yrs not 5.
19) Even if you have raised seed $, I think you can have an earnest chat w/ your investors about the next move. If you've tried everything & can't find high sustainable growth & are burning out, maybe rotating the CEOship is a good move? Take a break. Come back refreshed in a yr.
20) It is often much better to come back to something that is working (but not growing) than to start from scratch. This is why a lot of 2nd time founders prefer to buy cos and take them over instead of starting a new biz.
21) I think startup ecosystems need to be thinking about what is the alternative to high growth that we were bullish on at first but discover isn't there. IMO, finding high growth sustainable channels is often a LOT of luck. But we don't often have earnest conversations like this
22) The status quo is to just shut a co down if it doesn't find high sustainable growth. But I think we need to be creative - like my friends. The irony is if they sold, they would likely return the equiv of 50x over 15-20 yrs instead of 5-10. But it sure beats 0 or index funds

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More from @dunkhippo33

22 Sep
As an investor, I think it's impt to understand your strengths and weaknesses. And sometimes your strength IS also your weakness.

1) Some self-reflections here:
2) First and foremost, I'm a marketer. By training and background. At big cos and at my own past startup(s). My startup even sold to marketers. I even used to do affiliate marketing.

Customer acquisition is THE #1 thing I think about and live, eat, breathe.
3) And often, esp in software, where PM fit is not clear, customer development and cust acq is key priority to figure out and derisk.

As such, I orient most of my thinking around how do I think a co can acquire customers. What is that angle and scalable path?
Read 12 tweets
22 Sep
Some takeaways from @bernardjhuang 's SEO online event.

1) How to know if you should even do SEO?

You are 1 of 2 companies.

A) You are like a TripAdvisor (a content site) where SEO is the only thing that will allow you to win if you can do SEO better than your peers.
2) OR

B) You get "decent" CTR on Google AdWords (if you had the organic equivalent would it be worth it to spend time on?)

And you are post PM fit.
3) Even @bernardjhuang 's co is an SEO tool! And he is post PM fit. But working on SEO for his own company @Clearscope is not even top priority.

Other cust acq channels are higher priority.
Read 12 tweets
18 Sep
1) I want to talk about investor kindness in the startup ecosystem.

Personal story - I pitched an investor for my co yrs ago:

Me: "So what do you think?"

Him: "I don't want to say the wrong thing & call you a meek Asian woman, but I question how you'll lead a team of 100 ppl"
2) Needless to say, I was completely shocked that someone in this day and age would say something like that. Outloud. In Silicon Valley.

I was so stunned that I was wondering whether I had actually heard that correctly and if I was actually in a bad dream?
3) But it was in fact reality.

My next thought was that I needed to come up with a response really good and really quickly to respond with otherwise I would be a "meek Asian woman"!
Read 16 tweets
8 Sep
Some takeaways on growing a company to $1b/yr in revenue from @mark_rosner:

1) If you believe your product can accomplish a particular goal, you may need to dangle incentives to get ppl to just try it.

E.g.: maybe you even offer to pay your customer to get them to try it.
2) Hiring lots of people becomes a detriment. Whenever a startup touts how many ppl they have, he gets scared. Because ppl cause problems.

To the extent possible, refine processes & tech so you can make a lot of $$ per employee. For @AppLovin they only had a couple hundred ppl.
3) Try to "test" potential hires by structuring shorter term contracts. And you will know in the first month or two if someone is working out.
Read 13 tweets
6 Sep
I saw a pretty fantastic documentary last night called Netflix vs the World (on Amazon Prime).

Some interesting tidbits and lessons learned:
1) Background - @reedhastings was the initial $2m 😲angel check into the company (from the proceeds of his successful startup)

The co worked on a lot of biz ideas before landing on trying to disrupt video. There was a lot of e-commerce but no one was touching video at the time.
2) Marc Randolph and Reed Hastings knew that the big reason no one was touching video was that the VHS format was a real bear. Clunky and large. Hard to ship.

Anyone ever seen a VHS tape? I remember those from way back in the cobwebs of my childhood memories.
Read 27 tweets
4 Sep
Friday AM thread on startup accelerators having previously run one for years:

1) Should you do an accelerator?

As always it depends...some considerations...
2) Like everything else, figure out what is your goal?

-Is it a quick decision + $100k check?
-Introduction to a network in a diff geography?
-Help with your fundraising story?
-Connections to an industry?

etc...
3) Not all accelerators are equal!

A handful are AMAZING. The other thousands in the world, bluntly speaking, are crappy. And then there's everything in between.

Do quick internet research to find out which 1-3 may be a fit per your goal.

And then...
Read 19 tweets

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