VC's thoughts on company building? 'We need an incredibly capable founder!’

It’s like casting a lead in a Shakespeare play. 'We need someone incredibly capable, who can act, sing, dance, and perhaps juggle flaming swords!’

A VC’s Thoughts on Company Building 

• Why Read:

  • This article provides valuable insights from an experienced VC on the qualities and mindsets required for founders to build highly successful, enduring companies.

• Featuring:

  • Nakul Mandan (@nakul), Founder and Partner, Audacious Ventures

• Link: 

  • “Nakul Mandan’s Blog: Thoughts that inform my investment thinking these days”

Key Concepts and Tactics:

• Recognizing the Scarcity of Exceptional Founders:

  • Point: Understand that the most scarce resource in startups and venture capital is the exceptional founder who can drive a company to lasting success.

  • "The scarcest thing in the game of startups and venture capital is the force of nature founder who can will a company into durable success."

• Acknowledging the Difficulty of Building a Scalable Company:

  • Point: Recognize that building a company to scale over a decade is extremely challenging and requires navigating many obstacles beyond achieving product-market fit.

  • "Building a company to scale over a decade is very, very hard. Someone can gamify the venture game for a couple of years to get high valuations but you can't hype your way to $200M+ in revenue with high gross margins and a high growth path ahead. A lot of things need to go right beyond getting to product-market fit. A LOT of navigation needed over a decade-long timeframe."

• Investing in Founders Capable of Improbable Outcomes:

  • Point: Focus on investing in founders who have the potential to achieve improbable outcomes, given the low probability of startup success.

  • "Since startup success is such an improbable outcome, I need to invest in founders who are capable of improbable outcomes. We use this specific phrase because it makes our internal deliberations more pointed and aware of the uphill journey ahead."

• Evaluating the Urgency of the Problem Being Solved:

  • Point: Consider whether there is a pressing need for buyers to solve the problem being addressed by the startup.

  • "A question that deserves more attention than it gets from founders when evaluating an idea: is there urgency at the buyer's end to solve this problem?"

• Focusing on the Founder's Ability to Execute:

  • Point: Prioritize the founder's ability to create an organization that relentlessly executes on both product and distribution, rather than solely focusing on structural moats.

  • "Earlier in my VC career, I used to think a lot about structural moats. What I realized over the years is: structural moats mostly (only?) exist at scale. What comes before, and often is the moat itself, is the founder's ability to create an org that relentlessly executes (on both product and distribution)."

• Building the Right Team to Scale:

  • Point: Recognize that product-market fit can be fleeting without the right team in place to scale the company effectively.

  • "Product-market-fit can be a fleeting thing if you don't have the right team to scale the company around that PMF. In the words of Vinod Khosla - 'The team you build is the company you build'. Probably the best startup advice ever."

• Prioritizing Urgency and Speed:

  • Point: Cultivate a culture of urgency and moving quickly, as it has a multiplicative positive impact on startups.

  • "A DNA of urgency and moving fast constantly has multiplicative positive impact at startups. As Sam Altman says: 'Move faster. Slowness anywhere justifies slowness everywhere.'"

• Knowing When to Break Investing Rules and Frameworks:

  • Point: Understand that while rules and frameworks are useful in VC investing, it's important to know when to deviate from them, as the next outlier may not fit the patterns of past successes.

  • "In VC investing, rules and frameworks are useful but only if you also know when to break those rules. The next outlier will not check all the boxes that were put together based on the last 20 outliers."

Tactics Bitly used to Scale to $100M ARR

Why Read: 

• This article provides valuable insights on evolving a product-led growth strategy, experimenting with pricing, building a stellar team, and expanding into a multi-product platform.

Featuring:

• Amelia (Lerutte) Ibarra (@miadia), SVP and GM at SaaStr

Link: 

• “The 3 Secret Ingredients for Scaling to $100M ARR with Bitly CEO and CPO”

Key Concepts and Tactics:

• Evolving the Growth Engine:

  • Point: Experiment with pricing and packaging, optimize acquisition funnels, and refine the user experience to drive PLG growth.

  • "Bitly's focus was bringing all the different functions in the company into alignment, particularly with product and marketing. As you head down this PLG path, keep four things in mind. You might have to rebuild your marketing team. Bitly had an Enterprise sales-focused team. They had to rebuild that team and bring in new DNA to help with PLG efforts. Optimize your acquisition funnel. You'll have to figure out how to best optimize acquisition funnels for your PLG path. Expand pricing and packaging. Figure out how to convert some subset of users into paid. Refine the user experience. Be maniacal on refining and understanding the user experience by creating an experience customers love and finding ways to convert customers into paid packages or upsell them."

• Overcoming Fear to Drive Growth:

  • Point: Make bold decisions and overcome fear to capture quality users and drive growth.

  • "Not capturing these users for years was a pretty obvious missed opportunity, and the reason they didn't do it sooner was a general fear at the organization. It had been around for so long, and customers thought the anonymous link shortener was the product. No one was interacting with customers, and it was time to make some bold decisions. One of their biggest fears was that this anonymous shortener drives SEO and the breadth of traffic. They might lose all of that if they tweaked or removed it. And you know what? Those fears came true. They saw a decrease in website traffic. While that might seem like a bad thing, it wasn't. The biggest learning here is that changes like this mean you get quality users over quantity of users."

• Experimenting with Pricing and Packaging:

  • Point: Conduct frequent pricing and entitlement tests to understand what users will pay for and how to drive monetization.

  • "Bitly's online channel was relatively young, launching in 2019. When they launched it, there was still a lot of fear that it would cannibalize their Enterprise motion. They leaned into the fear and focused on frequent and rapid experimentation as they evolved the product. With experimentation comes pricing and entitlement tests. You should be doing these often. When Bitly had only free and Enterprise plans, the free plan had 10k links per month. At the time, the product's value was determined by link volume. When they launched the online channel, they didn't reduce the number of links in the free plan. Again, it was a missed opportunity. If they restricted the entitlements, the Bitly team feared people would leave. They did it anyway, and the 10k links per month became 10. They saw what users would pay for as they added more value to the product. What they learned by restricting access and making people pay was that users in the product understood they could do more with links and QR codes and were seeing the data, value, and insights from those engagements."

• Becoming a Multi-Product Platform:

  • Point: Identify market trends and customer signals to expand into a multi-product platform.

  • "Bitly saw incredible market trends related to QR codes. In 2017, they released a fairly nascent QR code offering. In 2020, the trend took off when the pandemic hit, and everyone was moving toward touchless. Were QR codes just a flash in the pan, or would they last? The number of use cases and how businesses were embedding QR codes into their operations gave Bitly a lot of conviction that QR codes were here to stay. Bitly saw a lot of signal that their customers wanted to use them for QR codes. They saw signals that customers were already using Bitly behind their QR codes. They also saw a lot of customers shortening links and sharing them on the leading link and bio platforms. So, they set out to build a solution. They didn't know how it would resonate with customers, so they built a quick MVP and sent it out. What kind of feedback did they get? They loved having their QR codes, and Bitly links in one place. And even more surprising, that people didn't know Bitly offered all of this. Bitly was ready to move into a multi-product platform."

• Building and Investing in a Stellar Team:

  • Point: Align the team, simplify operations, and create a culture that encourages experimentation and diversity to unlock success.

  • "To achieve anything we've talked about so far, you have to have a stellar team, and you have to unlock them and give them the ability to execute effectively. When Toby joined Bitly in late 2020, they did an engagement survey to get a sense of the sentiment and morale at the company. It wasn't good. People were disenchanted with the company. But you can't fix something if you don't know it's broken, so the silver lining here allowed them to think about transforming not only the commercial side of the business but also the culture. What folks at the company felt fell into three buckets: People didn't feel aligned with the organization. They weren't clear on their goals. They didn't feel connected to the vision and mission of where the company was going. So, the leadership team leaned in. They changed the culture by: Simplifying operations in a lot of ways, Ensuring everyone was clear on where they were headed, Including the team in developing OKRs and goals."

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