🧵

1/ There are 3 broad risks in the startup’s journey - product, market and execution risk.

A startup grows from idea to IPO by eliminating these systematically along the way.

Let us examine these.
2/ First, product risk.

Does the product you designed solve a problem for a customer. Does s/he care? Getting to a minimum viable product (MVP) broadly eliminates ~80% of product risk.
3/ Market risk - is there a market for the product you created, or can you iterate to a problem for a paying market? Getting to product-market fit (PMF) is about eliminating this risk. PMF eliminates ~90% of market risk for the then product, I think.
4/ Finally, Execution risk - can you keep feeding and cranking the growth machine, given you have PMF, without f*king up along the way?
5/ Important. Sometimes you can hit PMF and think market risk is eliminated for it to reappear.

PayTM is an extreme example. Market risk reappeared when UPI became bigger and faster-growing. They have had to focus on selling financial services (new market).
Specific investors help founders navigate these risks

- Product risk - angels/accelerators/pre-seed funds/soloVCs
- Market risk - seed funds (At Blume, helping founders move from MVP to PMF is the promise we make)
- Execution risk - Series A+ / growth capital to help you scale.
7/7 This is a simplistic model, but a useful framework for founders to keep in mind.

Would love to hear thoughts. Are there any other bigger risks I havent addressed that doesnt fall into these categories?

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Sajith Pai

Sajith Pai Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @sajithpai

6 Nov
For a venture nerd like me, this was such a terrific read (the transcripts are the best thing abt Colossus podcasts).

Brief thread🧵 on what I found interesting from @roelofbotha 's convo w @patrick_oshag
Sequoia holds $45b worth of undistributed public stock (companies in its portfolio who have IPOd), about the same as its private holdings.

Together, Sequoia's 'AUM' > India's largest AMC, SBI Mutual (~600kcrs = $80b)
Loved this framing. Seeing fundraising as a board recruitment decision.

Also for those who follow this, throwing some shade on that famous crossover fund which doesnt usually take board seats:)
Read 11 tweets
1 Sep
Why does a VC reject your pitch? 🧵

A perspective basis my last 3 years in a seed VC.
(this is true especially of seed investing, but holds for the broad VC asset class)
I work at @BlumeVentures, a seed stage tech VC, and we get 3-3,500 startup pitches a year. We can fund 10-12 at best a yr. This means that we reject a lot of great startups.
Some of these startups are rejected because they are too late or early for us, and thus don’t fit our investment criteria (blume.vc/for-startups). Some are rejected because we have invested in their competitors or in similar risk buckets we dont want to add to.
Read 11 tweets
26 Jun
🧵

On @ClassplusApps, its recent fundraising round, and what we can learn from one of the most exciting B2B startups out there today.

A B2B startup with a consumer DNA, that any B2C co would be proud of.
On thursday, Classplus announced its latest fundraising round, toting up to $65m across Tiger, @gsvventures and existing investors Falcon Edge / AWI, @BlumeVentures

livemint.com/companies/star…
It is been a crazy 15 months for the company since the 1st lockdown - it has seen 3 fundraising rounds during this period - all preemptive.

From Feb20 to May21 it has seen a 6x growth in paid customers, 12x DAU (almost 7 figures now at zero CAC!), and 7x MRR. Phew!
Read 27 tweets
10 Jun
🧵 on startup 'valuations'.

Why are loss-making startups run by 20-somethings 'valued' as unicorns while similar profit-making companies are valued at half that?

Thread below has the dope, but the longer read is 👇🏽
sajithpai.medium.com/exhaust-fumes-…

1/23
First, the title 'Exhaust Fumes'

Comes from a great quote by @fredwilson

“Early stage valuations aren’t really valuations. They are the exhaust fumes of a negotiation about two things — the amount raised and the amount of dilution.”

Let us understand this.

2/23
They say that chess is a game that can be learnt in an hour, but it takes a lifetime to master. Venture valuations are similar.

Here is the simple part of startup valuations. Take capital invested, and divide by stake diluted.

3/23
Read 23 tweets
7 Apr
I got this whatsapp message yday👇🏽fm a founder grinding it out, 1 month of runway left. But absolutely unwilling to give up.
We saw 2 great stories recently fm the ecosystem - as Meesho, Cred became🦄. Congrats to them, & let us celebrate their achievements.

But let us also celebrate the founders grinding it out without much love. Life is hard for them. It is tough mentally & not easy to keep pushing.
It takes a special grit and determination to chug along, to motivate your team on dreams and vision alone without hikes, or even delayed salaries; holding on to them when other startups and Big Tech are throwing money at them.
Read 5 tweets
13 Mar
🧵

On my fave startup + tech podcasts:)

1/18
Barton Biggs, research guru turned hedge fund manager famously classified people into visiles & audiles (ref ‘Hedgehogging’).

Visiles absorb info via eyes (reading)
Audiles via ears (talking / listening)

(Youtube wasnt too popular then for it clearly breaks his split!)

2/18
Now I am a visile & I have struggled w podcasts:)

Podcasts are great content of course, & lots there you don't get easily in writing. But I have wondered as to why I should take out 40-50mins to listen to a podcast when in that time, I can instead breeze through 3-4 posts?

3
Read 18 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Thank you for your support!

Follow Us on Twitter!

:(