I went deep with Jonathan Hsu, Co-Founder of Tribe Capital this week. He debunked a lot of the conventional thinking in startups and we talked about developing edge:
10 Lessons on data science, venture capital, startups and investing:
[THREAD] 1/ Units of time are the new currency
While businesses were valued for the dividends they paid out, the “impenetrable” moats that let companies spit off excess cash are dwindling.
A moat today is a buffer that helps a company get ahead of the next innovation cycle. 2/ To create a defensible business today, your product needs to be a utility.
You have to build something that solves a user pain, and then scale until it’s so fundamental that it becomes a feature of other products.
This is even more true for apps with 100M+ users. 3/ Remove friction every step of the way
Saving time for others allows you to compound time for yourself.
Every minute that you save others is time that they spend creating additional value by using your utility, or building on top of it.
Compounded time = winning formula. 4/ If you’re building a company today, start by assuming you’ll be successful.
What does success give you the right to do next?
Success is important, but reinvesting success to get compounding returns is where many promising companies plateau.
Think about this from Day 1. 5/ To grow a platform, you need to cooperate with and invest in other companies in the ecosystem.
This runs contrary to the common wisdom that tech companies operate in winner-take-all markets and need to create monopolies to survive. 6/ Model every interaction with customers to understand the business
In legacy businesses, we go deep on costs (revenue is only one line on the P&L)
In modern businesses, we can go deep on revenue attributors - engagement, activity, time spent.
This is where the value lies. 7/ Accountants were the first data scientists
Accountants work with a ledger to analyze cash flow, cost structure and assets and liabilities.
Data scientists work with customer activity to determine product growth, retention and churn.
Both are stewards of company health. 8/ Product market fit “can’t be quantified” is a myth
Accounting : Financial Health ↔ Data Science : Product-Market Fit
Data science provides a consistent and extensible method for breaking down customer behavior across businesses while being detailed enough to be useful. 9/ It’s hard to innovate if you just have one single, successful platform.
The success of a single flagship product and cash cow can blind you to more nimble competitors.
The “family of brands” strategy is a way that companies shore up their core while looking to the future. 10/ Always ask: “What is the Founder trying to achieve.”
Many people are happy operating venture backed businesses. Others are happy with non-venture backed businesses.
Getting a (sizeable) return is only possible in one of those 2 scenarios. Even then, it’s not guaranteed. 