This is The Friday VC Digest, a weekly newsletter sent every Friday to strengthen your knowledge on the key points of deal screening and investment memos. These curated articles offer some insights about assessing pitch deck in-depth and completing an investment memo.
I am Ange Michaรซl AHYI, I am already sharing articles every 2 weeks about tech & VC culture in Pause Curation (an example here).
๐ Need
How to Identify Customer Pain Points When Starting a Business
๐จโ๐ป Syed Balkhi
๐ข CEO | WPBeginner | Florida
In less than 60 words:ย A startup must solve one of these pain points for its client: 1- the cost of its used solution, 2- limited productivity leading to time-wasting for its teams, 3- a desired ease of process to improve its operations and 4- the lack of customer assistance leading to frustration, compared to the purchased value proposition.
Why this article? Discover which pain point the startup is trying to solve for its users and if the value proposition presented to clients is in line with the pain point.
๐ Team
How to Recruit a Marketing Team with Great Product Marketing and Demand Generation Abilities
๐จโ๐ป Tomasz Tunguz
๐ข Partner | Redpoint Ventures | San Francisco
In less than 60 words:ย At the beginning, the marketing needs two leaders: Product Marketing lead in first, and Demand Generation lead in second. Most startups take one people for these two jobs, but the cost of having two relevant people could be overweighed by the added value of their specific skills at their best.
Why this article? Knowing the choice of the head of marketing between these two priorities, know what it could miss in the equation and how the founding team will face this lack of skills
๐ Market
๐จโ๐ป Samir Adams Ghosh
๐ข Founder coach | Ghosh.com | San Fransisco
In less than 60 words:ย TAM onion is compounded of a centre, the spearhead niche a.k.a the initial target niche; numerous layers which are milestones, where the company reachs a similar or adjacent segment of its niche, and the ideal path which is the sequencing through the layers.
Why this article? Assess if the founders know well the characteristics of their TAM onion's centre and at least the next one-two layers in sight, and not having multiple spearhead centres at once in pre-PMF.
๐ Finance
Quantifying a SaaS Startup's Revenue at Risk
๐จโ๐ป Tomasz Tunguz
๐ข Partner | Redpoint Ventures | San Franciscoย
In less than 60 words:ย Revenue-at-Risk (RaR) is based on the fluctuations of the customer base's contracts. Two calculation methods: Top-down (Probabilistic RaR) or Bottom-up (Customer-by-Customer RaR). RaR is used to measure customer success efficiency and pilot the growth when scaling by minimizing lost customer revenue over time
Why this article? Be able to measure how the startup is holding its churn if the company had started to scale
๐ Product
Why Product Innovation Slows After the Series A
๐จโ๐ป Tomasz Tunguz
๐ข Partner | Redpoint Ventures | San Franciscoย
In less than 60 words:ย After the series A, a startup could see their product innovation capacity stuck by several reasons: 1- Technical debt coming from complex solution integrations due to ever-growing customer base; 2- Shift of CEO's focus, before intensively on product, now scattered between hiring, investors relations or managing; 3- Inertia caused by required customer education on each iteration.
Why this article? If a post series A company seems facing product innovation slowdown, try to see the main reason of that and if the founding team is implementing a solution like hiring a Product lead or prioritizing quality assurance (It could be code red before series A!)
๐ Metrics
How To (Actually) Calculate CAC
๐จโ๐ป Andrew Chen
๐ข General Partner | Andreesen Horrowitz | San Fransisco
In less than 60 words:ย 1- The basic CAC does not take account of free-to-paid client conversion time, creating a delay between marketing expenses and customer acquisition, causing monthly CAC to decrease when well used; 2- Include all marketingย & sales salaries and overheads into account (the Fully loaded CAC), but not relevant in the case of resources dedicated for each customer type (new and returning).
Why this article? Depending on the startup business model, you could calculate accurately the CAC and see if the founders track the enhanced of basic CAC calculation.
๐ Go-To-Market
Why distribution is the #1 reason for startup success (Part 1)
๐จโ๐ป Yannick Oswald
๐ข Principal | Mangrove Capital Partners | Luxembourg
In less than 60 words:ย The common practice is to think product in first, and distribution in second, but efficient distribution could be key against an excellent product. One of the distribution hacks is leveraging existing networks, like AirBnB posting its first offers in Craiglist. The hack permits to capture the huge network client base, but beware of platform dependency and obsolescence over the mid-long time.
Why this article? See if the early-stage startup takes advantage on an existing network, how the leverage is conducted, and the potential leverage of user acquisition of that; and on the contrary if the startup could leverage a network.
๐ Strategy
Defensibility x Scalability = The Marketplace Matrix
๐จโ๐ป Sameer Singh
๐ข Author & investor | Breadcrumb.vc | London
In less than 60 words: Uber needs 3 to 5x more funding than AirBnB to reach the same valuation.
Uber uses hyperlocal network effects so, the unicorn restarts the whole expensive user acquisition for each territory conquest.
Airbnb is built under cross-border network effects: each new user benefit to the whole platform, so the territory conquest cost decreases over time.
Between Uber and Airbnb, there are the regional network effects: several regional cross-border networks like Airbnb, but without interaction between them like Uber (ex: products based on local regulations)
Why this article? Assess if the startup benefits of a network effects category, their UE grow accordingly the network accordingly and their pre-money valuation is relevant. By the way, for the early-stage founders, see if they acknowledge well the stakes of their business model, and the required efforts to efficiently grow.
Thatโs it for today!
Do not hesitate to reach on Twitter or Linkedin if an article really touched your curiosity, or if you want to suggest your sources ๐
Have a good week end ๐ !!
Ange Michaรซl AHYI
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