The New Mindset for Product-Market Fit

New Mindset for Product-Market Fit NFX

by Gigi Levy-Weiss. Gigi is a General Partner at NFX, a seed-stage venture firm based in San Francisco.

New Mindset for Product-Market Fit NFX

Whenever I talk with early-stage Founders they are always worried about growth. It’s an easy mental trap to fall into — up and to the right growth is a windfall for startups because it generally means more users, more revenue, more success.

But many Founders fail to realize that the reason they aren’t growing is because they’ve missed a mission-critical step.

It’s well known that product-market fit is the absolute prerequisite to sustainable growth. It’s pointless to try to grow without a great offering that you’ve already proven that people want, need, and love.

But less known is an even earlier and equally mission-critical step. One that can save you months and millions. Before you can find product-market fit, you need to first define your product’s promise. I call this finding your product-promise-market fit. And it doesn’t require a single line of code.


There are 3 reasons many Founders skip the step of finding product-promise:

  1. First, Founders are essentially product people at heart. Whether we are creating services, marketplaces, entertainment, software, or something else, Founders are “builders” who have a vision of bringing something new to the world. We are eager to see and feel the impact of what we make, so we often race ahead. Building feels like a critical step in validating. That’s of course true — but it’s not the first step.
  2. It is widely accepted that the primary goal of any new company is product-market fit. Much has been written about product-market fit that you can find in great books like Eric Ries’s Lean Startup and Steve Blank’s excellent writing. As a result, most startups think that the only valid process is: build a lean MVP, iterate until you nail product-market fit, and grow. Again, this is not untrue — it’s just not the starting point.
  3. The last reason is that validating your product promise wasn’t easy to do (and sometimes not possible) even just a few years ago. It’s the emergence of better targeted and more segmented advertising platforms like Facebook that make this so easy to do today.

What the smartest startups know is that we have to first earn the right to build. Before we start building, we have to test our ideas against the market.

Not only will this unlock speed for your startup and save you time and money (the two non-renewable resources that early-stage startups most need to protect and maximize) — it will also accelerate and strengthen your discovery of true product-market fit.


Why product-market fit is critical

The #1 reason startups fail is that they run out of money before achieving product-market fit. Simple as that. Once you have product-market fit, funding is usually dramatically easier.

There are many different definitions of product-market fit, but in essence, they all revolve around three basic components: identified customers who want your solution, in a market large enough to justify the business.

Simply put, product-market fit is that magical moment when you become a must-have in your customers’ minds. This happens when you solve a real problem for them, or help them do something 10x better, or you allow them to do something they couldn’t do before.


10 Places to Find PMF


A simple test for product-market fit

One test for product-market fit: look at all the products you are using in your everyday life. Now ask yourself of each product: “If someone took this product away from me, would I be upset? Would it make my life harder in some way?”

The strongest product-market fit comes when users find they can’t live without a product.

Imagine what would happen if Google Maps and Waze were suddenly deleted from your phone forever — right when you were trying to get somewhere. Similarly, how would you feel if your new iPhone was discontinued? Or if Uber/Lyft were no longer available. You would probably feel that pain acutely.

If you love something, you use it routinely, and it makes your life easier or better — and if you can’t do without it — then that product has strong product-market fit.

When Slack was in its early stages, many companies tried to stop their employees from using it, saying it was against corporate security guidelines. Employees were so unwilling to do without the product, however, that companies were forced to find a way to accommodate their demands.


Real value is transformative

Products with product-market fit will bring real value to users. Value can come in many forms: money, time-saving, enjoyment, peace of mind, etc. But the thing you’re offering has to produce true value for users — it has to materially affect and transform their habits and lives — in order for you to have a business worth growing.

There’s little point to aggressively marketing a product that brings no value to its users. They may initially come to check things out but they’ll eventually leave. It’s like pouring water into a leaky bucket: even if it seems full for a second, it is very quickly empty again. That’s why product-market fit, delivering real value to your users, is so critical. It gives you a solid foundation from which to grow.

When my partner Pete Flint talked with Andy Johns (formerly lead of the growth teams at Facebook) on our NFX podcast, Andy revealed something that most Founders today may not realize: that Silicon Valley’s obsession with “growth hacking” was misguided. That’s because it was rooted in an extreme anomaly — companies like Facebook, Twitter, and LinkedIn — which had already achieved product-market fit. That was their secret enabling them to scale via internal growth teams.


Superhuman's Product Frameworks


But first, find your product promise

But is product-market fit truly the cornerstone of product development? It’s clearly a critical step, but I believe there is an even earlier step. First, you need to find your “product promise” and your “product-promise-market fit.”

To understand this, we need to break classic product-market fit into two distinct stages:

Stage 1: Finding a product idea that users want — a concept that sticks.
Stage 2: Executing on the product — actually building it well.

These are very different challenges. But the traditional product-market fit process bundles both of these stages together, as discovery is done through exposing the users to the actual product you build (or at least, something lean that mimics it).

But why spend time and money to build the product if you can first check whether your product promise — the theoretical approval that users give to the idea of a product —resonates with your customers?

It used to be that there was no other way. Before the days of modern online marketing, the theoretical way to try to check your product promise involved focus groups. But, as many brands found over time, users didn’t always behave in these groups the way they eventually consumed a product. Plus, the way you asked the questions often impacted the outcome of the focus group.

So, for lack of choice, building the product early (or at least its most important core, the MVP) became the norm, even in the agile startup world. This is no longer true today, especially now that you can test your product promise any number of ways before you even start building your product.

The product promise is in fact the first step of finding your product-market fit — and testing its validity should be done before spending any effort on building the product. This is especially true because, when separated out, Stage 1 above takes probably less than 5% of the time and cost of the entire product-market fit discovery process, but gives more than 50% of the validation required.


So, how to measure your product promise?

What you are actually testing is if customers respond well, and in a measurable manner, to your product concept. You are using language instead of code as your building blocks. You are telling your product’s story the way you would market it if it had already been built. For this reason, the description needs to be precise and true. You will only be tricking yourself if you verify an imprecise product promise. You can’t over-promise either. There’s zero point in getting good feedback for features you might be able to deliver in five years. What you need to do is ensure that the basic, core MVP that you are about to build is going to be well received.

Once you have a crystallized product promise down on paper — in terms of clearly defining the language, positioning, pricing, benefits, and value to your users — then the rest of the process of measuring for promise-market fit is straightforward:

  1. Create a bunch of ad campaigns for your product promise, to test different stories and theories.
  2. Set up multiple landing pages and calls to action.
  3. Define your audience on your chosen platform.
  4. Start marketing.
  5. Analyze campaign success and optimize until you get to a validated product promise.

If this sounds familiar, it’s okay. This is the exact product-market fit building and optimizing process — only with words before you have code.

You are marketing your product promise instead of a built product. You are sending your potential users to a landing page where you try to get them to respond to your call to action and convert into a “user.” Do this over and over again with different setups. Test like crazy, measuring everything, every step of the way. You need to think like a mad scientist experimenting with your language, art, CTA, pricing, ad channels, and audiences. But remember, your goal is to do this without writing a single line of code.

People often ask whether testing a product promise in this way can annoy or frustrate users. Wouldn’t they be upset that the product is not live? That you “tricked” them into clicking what ended up a waste of time?

The answer is no. You’re not lying to anyone.

You can tell them at the end of the flow that the product is coming soon. You can give them a large discount or status or reward for being early, for being first, for giving you feedback. Never underestimate human interest in that which is new.

If you are really worried, you can launch the test campaign under a different brand name, which you can change once you’re ready to go to market with a built product. At the very worst, you will be slightly upsetting a few hundred or a thousand users. That’s not a reason to build the wrong MVP without testing its product promise first.


Numbers don’t lie

Throughout this testing process, the need for benchmarking data is critical. Without data, you won’t be able to analyze your different campaign results to find out whether your product promise is positively received, or whether it’s had only a lukewarm response. For example, if you don’t know what clickthrough rate to expect for your specific audience, you will not be able to reach meaningful conclusions. Is a 1% clickthrough on an ad for small business owners in New York great or horrible? And if only 2% then give you their email, what should you make of it?

This data, which used to be the most secret asset of each company, is now a lot easier to come by. There is so much open-sourced and available marketing information from so many experts that you can easily learn how to benchmark your own data.

The two key metrics you must monitor as you test your product promise on a specific market are your ads CTR and the conversion of the landing page’s CTA. These will help you determine (compared to the benchmarks) how users have responded to your product promise. Later, when you’re measuring actual product-market fit, retention analysis — especially a cohort analysis — is usually the best KPI to determine if you’ve achieved it.

One critical thing to remember is that numbers don’t lie. Yes, you will need to run multiple tests at a time, because numbers can be depressed due to poor creative (which is why you should try a few different design options), or a badly set up campaign (which is why you set up more than one campaign), or your landing page might have the wrong CTA and therefore your conversions are low (so you should set up a few landing pages). But in general, looking at your data from the different tests, you will see that the numbers are always directionally correct. If the landing pages you set up have great conversions, then you are off to a great start and you can start building your MVP. If the numbers are bad, you should continue iterating on your product promise until you get it right.

As with most things, the middle ground is the hardest. If your numbers are just okay, it is easy to trick yourself into believing that’s good enough — thinking that once someone sees your “real” product, they will fall in love with it. This is never the case. If your early product-promise-market fit data is coming in at a solid “okay” then I strongly recommend iterating until you find a great product promise with white-hot conversion rates.

Over the years I have tried this product-promise strategy with many companies with growing success, especially as platforms such as Facebook have allowed for better targeting of specific customer segments with incredibly precise messages. What was impossible 10 years ago is incredibly easy to set up today: targeted campaigns for very specific audiences, with amazing tracking, which allows you to easily analyze responses to your product promise campaign.

One of the best examples I can think of came from one of our portfolio companies that decided to pivot about four years ago. The team had three different ideas, and before deciding which one to go for, launched three product promise campaigns to the target audience of each idea. All three were in the SMB space, so we expected similar conversion numbers for the ads. Two of the ideas yielded a decent 1% click-through rate. The third idea was an amazing 12%. And there was a similar ratio for the calls to action they tested out.

We had two decent ideas. But one amazing one. The company built an MVP based on the third product promise, got immediate love from the market, and eventually was a very fast exit to the main incumbent in their field.

And the potentially “upset” users who engaged with those early product promise campaigns? They signed up with their emails just in the hopes of getting early access later — and became the company’s initial paying customers once the real product was launched. We saved months and millions by checking our product promise before actually building the product. For startups that rely on speed in order to achieve product-market fit before their runway runs out, this is the difference between failure and success.

How expensive is this process? Not expensive at all compared to writing code. In most cases, a few thousands of dollars spent on campaigns will provide sufficient data to find your validated product promise.


A new order of operations for a new world (with marketing skills taking the lead)

No longer is the startup process: “find a problem, build a solution, market it.” The order of operations has been flipped.

Marketing skills (writing, designing, campaigning, and analyzing) now come in a lot earlier. Even before you’ve written a single line of code.

Today we should all embrace a new reality:

  1. Find a problem.
  2. Describe your solution (in words and design).
  3. Market your product promise until you find a promise that a big enough group of people really want.
  4. Then build your MVP.
  5. Keep measuring, building, and iterating — make sure your users are deriving true value from your product.
  6. Keep building & marketing your way to sustainable growth.


Marketing-minded Founders are going to be the new secret weapon. Their startups will learn how to test a product promise first, and will then achieve white-hot product-market fit — and funding, and engaged users, and yes, growth — that much faster.


10 Places for PMF



Announcing our new General Partner, Morgan Beller

Morgan Beller, NFX GP

Morgan Beller, NFX GP

Today we’re announcing our fourth General Partner, Morgan Beller.

Adding a GP is no small matter. These are often multi-decade relationships, so it’s important to find someone who both has the skills, network and mind to give our Founders the advantage, and also has a strong cultural and personal fit.

Morgan is all that, and more.

Here is someone with a trajectory, network, and expertise that is almost unheard of in technology. At just 25 years old she co-founded Libra and Facebook’s Novi wallet for the Libra network, quickly rising to become one of the most sought-out leaders at Facebook. Before that, she headed up corporate development at Medium and played a key role in developing their subscription model. And prior to Medium, it was a16z who first recognized her talent, and recruited her to join them as a Partner on their Deal Team. Morgan is a fast-rising star who is always at the center of what’s happening in tech. In fact, it was our Partner Gigi Levy-Weiss, one of Israel’s most connected and successful investors, who met Morgan when she visited the region in 2015 to learn more about the startup ecosystem. He knew immediately that she was extraordinary.

But it’s what lies beneath that makes her a powerful force for the companies she backs. Founders either innovate on an existing market or they create new ones. Morgan co-created a category-defining product at one of the world’s most dominant companies. She’s well-positioned to be an ally to our Founders who are working through the complexities of forging new markets. These are long, difficult journeys and Founders deserve an investor on their board who gets it. Who understands what they’re doing and will give them the time, space, and support to bring their vision to reality.

It also takes a person who plays on the edge. Who understands Founders who see things differently because they do, too.

That’s why Morgan chose NFX and it’s why we know she is a strong culture fit on our team. We believe Founders deserve a better fundraising experience so we’re building the VC firm we wish existed when we were Founders – one that invests in top people, supercharges them with proprietary software, and connects the entire Founder community with information via our content and software that expedites their success.

We believe in this vision so much that our Partners do not take salaries. This allows the firm to afford a 30-person team to support our companies and community. It also means we’re more aligned with our Founders because we don’t make money until they do.

We want to build a better tech community. One that honors the true Founders and gives them a home less encumbered with the money-focus, press, and distractions of today’s startup climate. We believe the next generation of great Founders deserve this better environment, a concentrated network of like-minded creators that serve as a compass on their Founder journey.

As Founders before NFX, we started 10 companies that exited for more than $10 Billion. We are Founders across multiple industries and geographies, with a focus on both Silicon Valley and Israel – the two most important centers of excellence in technology. Morgan as our new GP makes NFX even more formidable.

If you are one of the “crazy” Founders, if your ideas live on the edge of technology, if you’re a contrarian thinker who will stop at nothing to build your vision – talk to Morgan.

We have no doubt she is going to be an exceptional ally to the world’s most inventive Founders.


Meet Morgan – 6 Questions

What’s your background in tech?

I grew up on Long Island, New York. After college, I made my pilgrimage to California and never looked back.

My first job was at Andreessen Horowitz, where I was on the Deal Team. For the latter half of my time there, I was focused primarily on early-stage investing.

From there, I went to Medium and led corporate development. Then I went to Facebook where I initially joined the corporate development team. But shortly after joining, I realized there was no one focused full-time on blockchain, crypto, etc. So I made my full-time job figuring out what Facebook should do, if anything, in that space.

That led to co-founding Libra and Facebook’s Novi wallet for the Libra network.

What brought you back to startups and VC?

Being part of Libra from the earliest days made me realize that I love that phase of a project – the sitting around and figuring out what we should do. I’ve always found myself on nights and weekends working with Founders, whether it’s a friend or a former coworker who has an idea and wants to think through the name, the business plan, who they should go raise money from. It’s incredibly rewarding and it’s really fun. To have the opportunity to come back and have that be my full-time job is pretty awesome.

What made you choose NFX?

There is the “what”, there is the “who” and there is the “where.” For the “what”, I learned that I love working on the earliest stages of projects. I get the most energy and excitement from sitting with small teams around a whiteboard. On the “who” – I feel lucky that I’ve known the NFX team for a while and I’ve been able to watch them build NFX from a garage to the brand and force in our industry that it is today. And then there’s the “where.” I have a close personal and professional relationship with the Israeli tech community (I actually met Gigi on a trip there five years ago!). Israel is one of one as far as the talent, energy and passion that the country produces. I was particularly drawn to NFX’s focus on these two geographies.

The opportunity to do seed investing with a global lens and the team that wrote the Bible on network effects and marketplaces was an opportunity I couldn’t pass up.

What kind of Founders should come talk to you?

My favorite Founders that I’ve ever worked with, invested in, and are friends with have two things in common. One is they’re different. They’re contrarian. They really strongly believe in X where the world believes in Y, whatever it is. They have “a thing”. The second is they have this winning mindset, which looks different in different people. But if you have it, you know who you are.

What kind of companies are you interested in?

If you think of a startup as an equation, there are many variables and very few constant variables over the lifetime of a company. So the product changes, the market changes, the brand changes, the world might change. Given that, the two constant variables that I’m looking for are, one, a strong understanding of defensibility, specifically network effects and, two, a Founder who is already living in the future and just taking everyone else along for the ride.

What will you bring to the table for the Founders you back?

Between Andreessen Horowitz, Medium, Facebook, Libra, and the Libra Association members, I feel very lucky that I’ve been able to work with and learn from the best builders out there. I’m excited to take those learning lessons with me to NFX. Having been in the center of all these networks, I have a tight-knit community of high caliber engineers, product leaders, designers, investors, and operators to assist Founders in building out their own teams and networks.

Good vs. Great Companies: The Unseen Truths of Breakout Success

Good vs Great Companies NFX

by James Currier (@JamesCurrier). James is a General Partner at NFX, a seed-stage venture firm headquartered in San Francisco.

Good vs Great Companies NFX

For early-stage Founders, it’s rare to get a candid view into what happens behind the scenes of companies that break out from the pack. What’s clear is that successful Founders operate differently. Sometimes in large ways, but often in small nuances that tip the scales of success.

Even more rare is hitting that kind of success twice. As my friend Sarah Lacy titled her book, “Once You’re Lucky, Twice You’re Good.”

In this NFX podcast and essay, we get a look inside these kinds of companies and Founders with Selina Tobaccowala. As the co-founder of Evite (sold to IAC), CTO and President of SurveyMonkey, and then cofounder of Gixo (sold to Openfit), she has built companies that have shaped a generation of products and been used the world over.

We talk about the tipping point from good to great in early-stage companies, covering co-founder dynamics, hard conversations, managing risk, raising VC, selling your company, and starting again.

There are always outliers, but these are the things we’ve both found that often separate the good companies from the truly great ones.

Let’s jump in.


Great Founders have these hard conversations with co-Founders before they even start.

  • One thing I tell cofounders when they’re just starting: There are certain tenets you should agree on upfront. Including how and when you would sell.
  • Ultimately when those hard decisions come — whether it’s an offer on the table, or you’re dealing with an employee issue, or you’re trying to figure out how much funding to take — you have already established some of that base level conversation. You need to practice actually having that dialogue and having that conversation so that you can have that honesty, and you can have that rapport when you’re actually walking into it.
  • Because later when you’re trying to make those hard decisions — taking or leaving an offer, letting go of an employee who is a human being — it’s much harder to make those decisions in the heat of the moment if you haven’t established some of your base principles. You need to do that before you actually start.
  • Al Lieb and I paired up in our third year at Stanford (which was his final year and my junior year) to start Evite. Then we got together again to found Gixo over a decade later. In between, I had been CTO and then president of Survey Monkey. Al had founded ClearSlide. Our experience in 2016 was completely different from 1997 because we had both founded and run companies. We had stayed very close as friends and we knew that we were very compatible. Most important, we knew we could learn from each other. There’s also just this openness and honesty that we have with each other.
  • When we started Gixo, literally on Day One we laid out on a big whiteboard the type of company we wanted to build from a cultural perspective. Then we laid out what areas of responsibility we wanted and what we each wanted to learn. We did this to figure out who is going to do what because we do have some overlapping skill sets.


This contrarian advice is often the difference between “Good” & “Great” Founders.

  • Many people will advise you otherwise but for early-stage Founders, it is important to start building relationships with larger companies very early on. Even if it’s just introducing yourself and talking about partnership. Founders should start that as early as possible.
  • Here’s why — It gives you better optionality should you need to be acquired or raise capital from a strategic partner later down the road, one or two years in. Yes, you have to focus on your product and customers or on raising money and this is all hard — but you should also be spending time creating these relationships as well. It gives you so many options a few years in. This is the difference between good and great Founders.
  • With Gixo, I had started a set of those conversations early on. As you start growing and share traction, it’s good if you’ve already built some of those relationships. Or if they’re starting to think about expansion, then at least you’ll be front of mind. At Gixo, because we had a relationship with Openfit, I was able to pick up the phone a few years later and tell them: “Somebody is interested in buying us. But you’re a company that we already know and love. Would you guys also be interested?” Turns out they were.


Navigating Advice


Great Founders nail the balance of Internal vs. external time management.

  • Everything comes down to time that you’re spending. When you’re really early stage, you want to be mostly internally focused (85%, 90%, 95%) on what you’re trying to build. You’re trying to figure out the product. You’re trying to figure out for B2C and you’re not obviously focused on the client-side. But there has to be a portion of your time that’s reserved for external — whether that’s understanding the market better or talking to future partners.
  • There’s obviously also the talking to investors part, which sometimes takes 100% of your time, but having some of that balance of keeping your ears and eyes open as a CEO or Founder — that is part of your job.
  • This might be another characteristic that distinguishes great Founders from merely good Founders. The good Founders end up a year or two in without a lot of options because they didn’t put in the extra time to go make all these relationships in the market. They’re left without options. They might end up shutting down their company if they run out of funding rather than getting a small acquisition out of it and a future for the business.


Great Founders don’t build companies to get acquired.

  • I think that you need to build your company with the idea that you want to grow it, build it to go public, or build it to be a big brand.
  • That’s what we always set out to do. I think that if you have the view from the beginning that I’m building this to sell it or flip it, you’re not going to make the right day-to-day business decisions.
  • Great Founders build because that’s what they need to do — they have no other choice.
  • Still, they also build relationships to give them optionality as mentioned above.


Great Founders seek the risks in their ideas and prototype that — before anything else.

  • We didn’t necessarily immediately come to the Gixo idea. Al and I both knew we wanted to start something. We said: “What’s the best idea we can come up with in a reasonable amount of time that we’re passionate about?” We gave ourselves a timeline. We gave ourselves till eight months and said, “Can we prototype, up to prototyping two different ideas and see if we can validate an idea? If not, then we’ll go find other things.”
  • So we did a whole bunch of research. We had a few different product ideas and prototyped a bit, did a bunch of consumer research. The Gixo idea emerged.
  • The biggest risk of the product, we thought, was would it be weird to essentially have somebody voicing over your exercise because the way the product works is there’s a live human being who is looking at all the data whether it’s a visual data of a camera if you’re indoors or it is actually looking at your pace, your elevation, your step count. They’re saying. “Hey, James. You’re about 3% away from your goal. You can push it.” Or, “Hey, Jane, you’re going up a hill. I know you can do it.” They’re really personalizing. Our question was “would people find that strange? Would people find it strange that someone was watching them?”
  • That, we felt, was one of our biggest risks with the idea. We really just prototyped that piece and got a whole bunch of users in to validate it.


Idea Frameworks



“Stealth is Stupid” — Great Founders get feedback as early on as possible

  • It’s surprising how few Founders do their research — because many of the ideas that people are thinking about today have been tried before in various formats.
  • For Founders, competitive and market research is extremely vital.
  • Just because an idea was tried before, that doesn’t mean that you shouldn’t try it again. Things change. It’s not that ideas can’t be redone. It’s understanding why those things failed. Was it a core problem with the business model? Was it something in the age of time or is it actually a bad idea?
  • Many Founders are resistant to actually comparing notes with others who might have tried the same thing before. I think there are actually two aspects. One is arrogance that “I can do it better.” Then, I think there’s the second piece of it which is “Oh, I don’t want to tell anyone my idea because they might take it.”
  • Dave Goldberg was the one who kept saying: “Stealth is stupid. You need to collect information, talk to people, get their feedback.” There’s this wealth of knowledge out there. Be open with people. It’s going to help you get the best information back possible.


Great Founders talk to their users — a lot. It’s actually an acquisition and retention tool.

  • You always want to be running an onboarding test or a new user engagement test at all times because getting that initial user to start — whether it’s to send that survey, whether it’s to send that invitation, whether it’s to actually go exercise — that is always the hardest challenge when it’s easy to download an app. It’s easy to log onto a website or start a free trial, but getting that user to take the first action is so hard.
  • Startups are often too wary of asking a user questions. I’ve found more and more that people actually are willing to answer those quick questions so that you can get to that experience that is more customized and personalized to them. I think that’s underused.
  • You can’t be scared of your users. Just have a dialogue. Be one with them. Often as builders, we just feel like, “Oh, I’ll build it.” Then they’ll do it or they’ll not do it. But in fact, there’s an intermediate space where once you start engaging them with whatever you’ve built, you can start to learn very quickly just by actually talking to them. Sometimes, Founders are fearful of that.
  • Think about what are those light-touch engagements you can get them to do initially. It is potentially just answering a couple of questions, giving them some information back, but it’s like, “How do you think about what are some of these light-touch engagements initially or activations initially,” so that you then can get them to take that really retentive step.
  • Product virality was a key success of Evite. We were one of the first, if not the first product out there, but I think the big differential for us was that we were very focused pretty early on at AB testing.
  • We were constantly trying to look at that viral loop and look at how do we take one of the invitees and turn them into a creator. Back then, I’m sure the numbers have changed, but the average Evite was 19 people. How do we take one of those 19 people and get them to essentially register and then send their own invitation out?
  • That was the big key that we focused on. What was that viral coefficient? This was obviously before all these words were nomenclature in the market. What worked well with Evite was that we were able to do a bunch of optimization to get people to register, get people to understand the use cases, and how broad they were and send out their invitations. We were able to grow pretty naturally.
  • The other big piece is really starting to look at what are the characteristics of people who retain. Obviously, getting a user to stick with you once you’ve acquired them, every 0.1% improvement in churn will have a massive impact on your long-term business.
  • Monitoring churn — especially in consumer businesses — helps you figure out what are the characteristics of the users I’m acquiring that retain better. What can I get them to do in the activation stage? What are those one, two, three things that I get them to do that then actually ties to churn?
  • The businesses are really built on retention because that means defensibility, and defensibility creates value.


Great Founders know to sell when there is no true path to a higher return (My Evite acquisition)

  • Background: We started Evite in 1997, launched the product in the summer of 1998, and took our first round of funding at the beginning of 1999. We ended up taking a lot of funding — $37 million in total.
  • One of the big mistakes we made at the time was that we took a lot of funding. It was the dot-com boom where everybody was taking a lot of capital. What happened in 2001 was that the digital advertising market also collapsed. That was our main revenue stream.
  • The decision to sell: It became very, very clear, given the market crash in 2000 and 2001, that a path to get a financial return for the investors was going to be too hard. We got a lot of pressure from our investors to sell. At that point, investors were taking the approach of just getting back whatever capital they could from properties that still had some value.
  • We were a good company. People were excited about the product. So investors saw that they could get a good chunk of the capital back and wanted us to sell.
  • At the same time, we were looking at how we might expand the B2B side for corporate events and how to create more of a community. Everybody had their profiles and friends already on Evite. Given different circumstances, we might have taken that path.
  • But for Evite, at that time, there was really no way not to sell. We had lost majority control. We could see no path to a higher return. Given the environment at the time, it would have been difficult to achieve a $150M or $200M valuation in a reasonable time for investors. Investors are looking at least for that sort of 5X return, if not more.
  • So, how did we sell? Because Evite had built this brand, it was a question of: “Okay. Let’s go and try and see if we can sell the business.”
  • We did get an offer to sell for $180M. An executive on our team turned it down without discussing with Al and me. It was a good valuation. But in retrospect, it didn’t matter. The acquiring company was going to buy us with stock. That company is no more.
  • We ultimately sold to IAC which allowed our investors to get their capital back. So it all ended up for the best, given the circumstances.


How to make hard decisions: Raise More or Sell? (My Gixo acquisition)

  • With Gixo, it was a very different story from Evite. We had taken a lot less capital — a $5 million seed round.
  • One of the big learnings we had is fitness is not that viral when you start thinking about the non-fit customer. They don’t actually want to work out in front of each other in any way. That was something that became very clear to us that virality is not as natural in fitness.
  • We were doing pretty well but we weren’t crushing it. Our unit economics were decent. We brought our payback period to about 12 months based on our customer acquisition cost (CAC). Investors really want to see about a six-month payback period. We were constantly iterating and improving, but it still became clear that we were not going to easily hit the six-month payback period.
  • With Gixo, we made the decision to sell based on a number of factors, but the biggest was this question of the required next capital raise.
  • That is partially why we decided to sell the business because we realized that to grow Gixo, we would need to take a large, large amount of capital to create a brand. If you look at fitness brands and you look at companies, Peloton has been so successful and it’s a great company, great CEO, but they’ve raised a lot of capital. You have to build that brand. We figured we’d need to raise $20 million or more in order to spend what is required to really build a brand. That’s what we would need to put the pedal to the metal on marketing and drive CAC down.
  • It was not going to be an easy raise.
  • There were 2 paths ahead of us. We told our investors very early what we were debating. We said we were open to getting acquired, at the very same time we were having fundraising conversations.
  • We had gone and pitched Raine Group which has both a VC and a private equity arm. The VC was for our funding, but it turned out their private equity arm was a primary investor in Beachbody Openfit who ended up acquiring us. Their VC side had a conversation with their PE side. It was a little bit of just luck in the process. I met the CEO of Beachbody and was just very impressed with him.
  • At that point, Al and I were starting to figure out what the terms of a new venture round would be and how much we would be diluted. The terms weren’t going to be fabulous compared to our strong seed round. On the other hand, we had this one very interested party in Beachbody. Then, I was able to get another party to the table — a company we had had partnership discussions with. That gave us a lot more leverage and really enabled us to get a better exit on better terms. That’s how we decided to sell vs. fundraise more.


Raise more or sell?


Great Founders weigh the financial — and the emotional — trade-offs.

  • Whenever they are considering funding versus an acquisition, Founders need to figure out if it’s worth it for them.
  • They need to ask themselves — and each other — “Look, if we’re going to raise another $20 million, we’re going to get diluted, we’re going to own x% percentage of equity. On the other hand, we’ve got an acquisition offer of $20 million, which means we will make X amount if we sell today. Or we could go another two years after raising this $20 million, but then we’re going to own less. What would we need to sell for, in two years, after getting that dilution, in order for us to make the same amount of money? And what’s the risk between now and then of actually getting there?”
  • These are not simple questions to figure out. VCs think about these types of questions all day long. Founders typically do not. The best source of information on this (besides lawyers) is other Founders who have been through it. Ask them for advice on dilution and execution risk.
  • Al and I had decided on where we would sell, at the beginning. Our risk tolerances were different based on our history. Reid Hoffman, who was our board member and mentor, said: “When you have two Founders, you always want to think about the lowest common denominator. Because if you don’t take an offer — when one Founder actually wants to sell — and then you work at this for 2 or 3 more years and then you can’t get that same liquidity for your other Founder… how can you look them in the eye?”
  • Whichever Founder has the lowest risk tolerance that has to be the risk tolerance you go with. It makes so much sense because it’s hard to push someone to be more risky. It’s easier to push somebody to be less risky.
  • That advice was so prescient. It’s exactly why you really want to make sure you’re having that open conversation with your co-founder.
  • Ultimately the people and the friendship are going to be the most important things in life.
  • So it was a question of what return would we need to get, if we raised funding, to end up in the same place where we would end up with the acquisition offers on the table. That’s just the pure financial side.
  • Are you willing to take that risk? That becomes a very, very personal decision based on what else has happened in your life and where you are.


Great Founders understand leverage.

  • When someone is interested in buying your company, obviously you have to figure out how to set some pricing.
  • James: I love pricing psychology. Who puts out the first price is a big question. When I was at HBS, they taught that you should anchor. You want to be the first one to put out the price, to anchor the conversation, but in practice, many people have seen that whoever puts out the first price loses.
  • At Gixo, we ended up putting out a range based on what our seed valuation was, plus where we were at that moment.
  • Always expect that the counteroffer will come in at the lower end of your range. If you say 20 to 25, then they hear 20. If it comes too far below your range, then they are not serious.
  • Once you have the counteroffer and it’s firm, you want to go pretty aggressively to shop for other offers. We went to three to five different people and said, “You’re someone I like. I respect your company. I respect your values. You’re somebody I’d really like to work with. Is this something that your team might be interested in?”
  • Getting two people to the table makes a very big difference in terms of creating negotiating leverage.
  • Be respectful in your offers and terms. Keep them reasonable. You don’t want to leave a bad taste in their mouth if they may be your future employer.
  • Of course, you also want to leave as little on the table as possible.


Great Founders weigh risk/reward when selling for cash vs. equity

  • When selling your company, the decision about taking stock or cash is exactly the same mindset that you would have thinking about any startup employment offer. If you are somebody that is in a position where you can take more equity and you believe in the company, it’s higher risk but higher reward.
  • In a private company, it comes down to this: do you have faith in the company buying you, and what was their last valuation? If you’re taking equity, it’s really important that you understand what was the last valuation that was given by investors versus revenue, and how comfortable you are with that.
  • Then it’s just the same compensation decision: how much do you want to take cash out and how much do you want to let ride?


Great Founders talk with their employees to keep momentum

  • At Gixo, when we faced our raise or sell decision, after we talked with our investors, we turned to our employees. We were open with them in terms of letting them know we were looking either to sell or raise funding. Whichever path, you want them to be excited and involved.
  • I think employees actually appreciate the fact that you’re saying, “Hey, we’re open to options, and we’re going to see what’s best for everybody.” It’s critical that they feel comfortable enough to continue focusing on the key metrics and on growing the company, no matter what is happening.
  • Whether you’re trying to do your next fundraise or you’re trying to get acquired, the better your numbers are, the better the outcome is going to be for everybody.
  • Just stay focused on your 3 to 5 key metrics. If you can get your team focused on just keeping the numbers growing that you cared about last month, then that’s a good way to keep everybody focused on what’s going to be best for the company through the acquisition as well. You’ve got to keep that momentum going.


Great Founders address the 2 big reasons why deals go south

1. Key employees are not on board

  • Being involved in a bunch of the acquisitions (Evite and Gixo — plus acquiring 10-12 companies while I was at Ticketmaster and SurveyMonkey) one common way I’ve seen deals go bad is if some of the key employees are not on board.
  • When you’re acquiring a company, you’re not just buying the asset of the product. You’re also buying the talent. That’s why I feel like involving the employees and getting them on board on the earlier side is actually a good thing because that means that you’ve had that discussion and what that actually means for them.
  • That’s also where things come into play like, “Okay, can we do retention packages? What is the sort of equity and job offer packages for the employees?” Those things are really important because that’s where a chunk of the value comes sometimes to the employee pool.

2. Non-transferrable contracts

  • The second reason deals go south is if there are any issues of contracts being non-transferable with a sale or if there’s anything that puts actual revenue at risk. That’s more when you’re talking about enterprise business or even something like venues with a company Ticketmaster that I saw versus a pure B2B business where almost everything is transferable.


To listen to the full, candid conversation between James and Selina, you can visit the NFX podcast here.


Fundraising Checklist


Connect with James Currier

High Leverage Time Management

High Leverage Time Managment

by Pete Flint (@PeteFlint). Pete is a General Partner at NFX, a seed-stage venture firm based in San Francisco.

High Leverage Time Managment

For Founders, time is always in short supply. Being deliberate about how you spend it is an enduring, daily challenge.

In the early stages of your company, before you’ve achieved product-market fit, time management is easier because there’s only one thing that really matters: getting early users to love your product. This gives you a simple way to prioritize your calendar.

But as you go from running a product to becoming a CEO, it’s no longer as simple. Effective time management is about prioritizing and focus. But what you should focus on changes dramatically as you scale your company.

As a result, you have to develop a more robust set of time management tools and techniques. Today I want to share some of the techniques and mindset that I used as Founder and CEO of Trulia that gave me speed, focus, and effectiveness — resulting in the highest return on my time.

Also, because there are many equally effective approaches you can take and there is truly no one-size-fits-all solution, I invited a few breakthrough Founders to share their best time management advice, which you’ll find included below. (Thank you Michelle ZatlynRyan Hoover, Gagan Biyani, Sami Inkinen, Julia Hartz, and Jessica Scorpio.)


Use routines (and speed) to reduce cognitive load

  • Running a tight schedule. For example, my day is scheduled ahead of time in 15-minute increments. US President Bush used to schedule his workday in 10-minute increments, and likewise, President Obama’s workday included very little unscheduled time.
  • Creating a routine to reduce unnecessary cognitive load and complexity in life. Mark Zuckerberg famously wears the same shirt every day “to make as few decisions as possible about anything else” except how to run his company. You don’t have to take it to that extreme, however — personally I think you need to have some flexibility, and allow for the kind of serendipity in your day that spurs creativity by changing things up on occasion.
  • If it can be done quickly, do it now. Get in the mindset that if something can be done quickly, do it now, in keeping with David Allen’s famous concept from Getting Things Done that you should never put off something that takes two minutes or less, like sending a quick email reply. When you get something done quickly, it reduces your mental load and also establishes a habit of speed for the rest of your organization.


“Turns out that getting things done is a skill. Some people have a hard time starting a project and others have a hard time finishing a project. In a growing company, getting things done is super important since there is always more to do than time and people to do them.”

“As a manager, you need to make sure your team is both starting projects and finishing projects. If someone is great at getting going, but has a hard time completing the last 10%, pair them up with someone who can do that. Or vice versa. Asking questions “how can we get this going faster?” or “how can we deliver ahead of schedule?” can also be helpful.”

“It can help people think through constraints and how to remove them, and sometimes you will be surprised by how much you can accomplish. There is a difference between hard and impossible – and I have found that sometimes acknowledging that is important.”


Run High Leverage Meetings

  • Keeping meetings short. We all know how meetings can be a productivity-killer. Revisit your recurring meetings on a regular basis, and ask which ones you can cancel or reduce the allocated time for. It’s critical to keep your 1 on 1s with those who report to you directly, but keep them really short and allow people to opt-out of them. Also, not everything has to be done in a meeting: always ask what can be done better via email or other more time-efficient communication.
  • Practicing meeting management. Make it clear that each meeting needs to have a clear agenda, clear purpose, clear owner, and clear follow-up notes — especially for any meeting longer than 15 minutes.


“The key to productivity for me: Limit meetings. It’s very easy for teams to fall into a meeting-heavy culture. At Product Hunt we collaborate asynchronously the majority of the time, using Slack, Loom, Trello, and other tools. We limit meetings to 1-on-1’s, weekly project check-ins, and occasional brainstorms. This work culture is especially important for distributed teams that work across time zones.”


Debrief Template



Delegate & Say No

  • Delegating as you scale. The only way to prevent your calendar from being overwhelmed as your company grows is to free up time by delegating with explicit instructions and responsibilities. Ask yourself if you are the best person to be making the decision or be in the meeting. If not, delegate.
  • Say no. Saying yes to everything is the opposite of focus. You have to be disciplined and learn to say no to meetings, events, etc. that are not likely to be productive. Don’t succumb to FOMO and say yes to every opportunity that crosses your path.

“Pick your battles. Determine what areas (marketing? fundraising? product?) will be the most important to your success and focus on those. Otherwise, hire people who “manage up” well, delegate to them and stay minimally involved.”

“The more stuff you need to “approve” or get involved in, the less time you’ll have for whatever is most important. This also means you should hire more competent people earlier in the company — even if it costs you significant (co-founder level) equity. Great people are always worth it, and bad people can be fired anyways.”

“Finally, I don’t do much angel investing or advising. If you want to be an investor, become an investor. If you are a startup entrepreneur, then you’ll make 90%+ of your net worth from that. Just like with hiring great people, I pay 1% to a financial advisor and he manages everything — I never have to think about investing.”


“As a company grows, learning how to give away some of the responsibilities to others on the team is critical. This is true both for founders as well as others on the team. As we grew from 300 to 1000 people at Cloudflare, you would often find people talking about “Giving Away your Legos” inspired by this article. It was helpful to have common language that everyone on the team could use.”

“Prioritization and accountability are important. When we were an early startup, we had a prioritization and accountability process that happened every three weeks. As we grew that lengthened to every six weeks and today, we go through it quarterly. It is part of our operating muscle as a company. Acknowledging what is and isn’t going to get done every quarter, and who is responsible for it, is helpful with time management, and more importantly, operational execution.”


Constantly Recalibrate Your Focus

  • Perform regular time audits. Think about what you want to be spending your time on, and look back on your calendar to find out if you actually are spending your time in that way. Looking back on a weekly or monthly basis and making adjustments will really pay off over the long term. I used to change up my own management schedule every 12-24 months as the business evolved.
  • Define the purpose of your time. It helps to internalize this principle: start everything by thinking about the purpose of your time: “this day/meeting/period of time will be a success if X happens”. This is likely to shift as your company grows, from product-building in the beginning to comms/HR later on.
  • Important, not urgent. Learn to distinguish between the important and the urgent, and focus on the former.
  • Give yourself space to focus. I’m also not a big believer in multitasking. When I’m doing something really important, I like to turn off all my notifications and even physically escape to a secluded, solitary environment.


“Every founder has an order of magnitude more things to do than she has time for. This can (or will) be stressful and make it feel like you’re constantly behind on everything. Simultaneously, startup whisperers everywhere tell you about ‘hustle as much as you can’. That can’t work.”

“After almost 20 years (!) as an entrepreneur and founder, I think the reality is that when I look back every year, it’s just 2-3 hires, 2-3 decisions and maybe a couple of other things such as fundraising or a key customer, that delivered 95% of the value and impact for the company that year and beyond. So it is extremely important to identify these key levers weekly, monthly and quarterly and spend at least 30 mins each week to allocate time so that those few things get done and almost everything else gets a “no”.

“In the absence of a clear project/problem to solve, I always think about three things: (1) People, (2) Cash, (3) Strategy. If we have the capital to build, the very best people in the world (who are happy and productive) and we are cutting trees in the right forest, I’ve done 95% of my job as a founder & CEO. Everything else can wait.”


“Time is a fixed resource. Its scarcity makes it the most precious unit to manage. I focus my effort in time management on auditing the time I spend against my highest priorities. I color-code my calendar so it’s easier to audit and I quantify the amount of time I spend on certain things like hiring, strategy, communication, etc. against the areas that I’ve identified as the highest output for my time.”


Leadership Frameworks for Startup CEOs



Adjust Time Management Techniques As You Scale

  • Ultimately, time management comes down to prioritization. It’s about constantly thinking about the highest points of leverage for your time and making adjustments as your company grows.
  • Early on the emphasis for Founders is on product management, and it will naturally gravitate towards HR (culture & recruiting) and communication. Founders who are builders may have a proclivity against those things and will be tempted to continue spending the majority of their time on product, even when that is no longer the best use of your time. It will take active effort and discipline to rebalance your calendar for the new needs of your business.


“One of the best strategies I’ve found for time management is prioritizing my time vigilantly. I have ADHD as many entrepreneurs do. This can be a strength but also needs to be managed. I identify a short list of priorities the night before and rank order them. Sometimes I set a time limit per task in advance and set a timer. Managing my calendar effectively is also a big point of leverage. It’s important to reassess standing meetings and consider setting shorter meeting times with buffer. I think it’s extremely important to be present. By scheduling certain types of work at the most appropriate time a feeling of flow can be accomplished.”


Prioritize Your Own Health & Learning

  • Prioritize your health. Sleep, exercise, and nutrition are a must for a healthy mindset. Every hour you gain at the cost of your health will be paid for by decreased energy and cognitive performance across the board.
  • Learn from others. As I wrote in How CEOs Think, seeking out advice and feedback is key. The more advice you can get on your time management, the better. Get regular feedback from a coach, mentor, or peer set so you can learn how to improve your time management skills so that your organization can thrive as well.


“Having a healthy lifestyle – exercising most days, meditating, sleeping and eating healthy helps me be more effective. Having a set schedule for these things makes it easier to maintain the routine. It can seem boring but it really works. By being more successful at managing myself I can also be a better leader. Trusting and delegating more to direct reports makes it possible to spend time on the most important things. Being intentional with my time and limiting distractions is key. For instance having set time for email and realizing what events or activities are truly value add is time expanding.”


Communication Habits Are The Key

Communication is key to maximizing leverage on your time. Communication is about repeating in a clear way what needs to be done.

I try to end every day with inbox zero because I find that if I let a backlog of communications build up, it can have a snowball effect. I try to reply to every email within 24 hours as a result.

Communication is also about making sure that the people on the team who aren’t communicating are communicating more, and that goes hand in hand with building the right culture and investing time into recruiting the right talent.

By building the right communication habits, you make it easier to delegate and focus your time even as your organization grows.


Debrief Card


Connect with Pete Flint

The Winning Psychology of Top Founders in Fundraising Meetings

Winning Mindset NFX

by James Currier (@JamesCurrier). James is a General Partner at NFX, a seed-stage venture firm headquartered in San Francisco.

Winning Mindset NFX

Top-performing Founders know something that others do not: when you meet with VCs, don’t just fixate on getting their money — learn from them.

For any given meeting with a VC, the chance it will result in funding is between 1% and 10%. That means you have 90+% probability that you will not raise money from this person. So if that is your only goal for that meeting, you are wasting 90%+ of your meetings.

It’s better to view the meeting as an opportunity for you to build your company using the information you get from the VC, not just the money you might get. This will give you a higher return on your time.

Remember that investors see 1000s of companies and have invested in 10s or 100s of them over their careers, which means they’ve likely seen different insights than you have. They see and hear things that you may not. This wealth of experience is sitting right in front of you. You just need to know what to ask, and how.


Get Into The Right Mindset

  • Come to VC meetings as an equal, not as if the VC is above you, or below you.
  • Collaborate in discussion, don’t just try to go rapid-fire through all the ideas in your head.
  • “Pitch” meetings are badly named. They are better seen as strategy meetings.
  • As a Founder, your #1 job in building your startup is to learn fast. VC meetings are no exception.
  • Use the first part of this strategy meeting explaining what you know about your business so far, not simply “pitching.” Then the vast majority of remaining time should be spent asking the VC questions and engaging in a dialogue as collaborators.
  • The ratio looks like this: If you have 10 minutes, explain what you know about your business for 4, and ask questions for 6. If you have 30 minutes, explain for 8 minutes, discuss for 22. If you have an hour, explain for 12 minutes and have a discussion prompted by your questions for the rest of the hour. You should have a large appendix in your deck that you can refer to during the discussion period.
  • The VCs you talk to are likely to give you different pieces of advice because there is no one right answer. But over many meetings, you will cobble together the right advice. You’ll then be able to improve your business and move up the ladder of proof so that investing in your business becomes a no-brainer.


Ladder of Proof


To help Founders get into this mindset, I’ve collected over 40 great questions that I’ve either used myself or observed from others in pitch meetings. These are questions that every Founder should ask in his or her meetings with VCs. We’re sharing them today as a resource to help Founders open up the dialogue and start building more authentic, open relationships with their investors — starting with the very first meeting. After all, these could be decades-long relationships, even if the VC doesn’t invest this time around.

More important than the questions themselves, though, is adopting a learning mindset and using these collaborative conversations to establish Founder-VC fit.

Note: Some of the questions below are similar. This is because how you ask something matters. In particular, it’s good to use the questions on this list to get outside yourself and ask from the perspective not of “my company” but “this company I’ve shown you.” Because that’s how your strategy consultant — the VC — is looking at it.


Getting a Sense of How Your Company is Viewed

1. You’re busy, and a lot of people want to see you. Why did you decide to take the meeting with me? What were you hoping to hear?

2. When you look at my deck, do you think it adequately reflects the business as I’ve now described it to you?

3. When you explain this to your partners, how will you describe this business

4. What are the negatives your partners will think of first when they look at this business? What initial concerns might they have?

5. How much do you think location matters? How should I be thinking about location/geography?

6. How can you see this company fitting in your portfolio?

7. Are there challenges to this company fitting in your portfolio?


Flipping the Script

8. What is the one thing you think I’m underestimating or being naive about?

9. What are the main barriers you see to our success? What are the main concerns you have that could cause you not to invest?

10. Can you really see your partnership investing in this company?

11. After what I’ve described, are there patterns you’ve seen in the past (positive or negative) that would apply to this business? E.g. ad tech is dead, hospitals are a horrible customer, sales teams are great customers, etc.


16 Fundraising Lessons



Competitive Landscape

12. How many other companies have you seen that seem to be targeting the same sector?

13. Have you seen somebody try this business and fail or succeed in the last ten years?

14. How common is this idea in the world already? Have you ever seen anything like this before?

15. Are there successful companies this startup reminds you of? Any good analogies? (e.g. the “Craigslist” of farming equipment)

16. Do you get the sense that we’ll be able to defend this business once it’s up and running?

17. Are there any companies you think it’d be natural for this company to partner with either now or in the near future?

18. Is there anything I’ve shown you that is on trend with other companies you’re seeing?

19. Now that I’ve explained the business, what sectors would you categorize it in?


Addressable Market

20. Does the way we’ve calculated TAM feel right to you?

21. The way I’ve calculated TAM is on this slide. Is there another way you could think of calculating the TAM?

22. Could we redefine our market to make it a bigger market? E.g. Airbnb TAM as home rentals vs. much bigger Airbnb TAM as hotels.

23. What’s your opinion of the niche this company is targeting to enter this market? In talking this through, is there any sub-segment of the market where you think the fast-moving water will be?

24. Can you see this being a billion-dollar company? Why or why not?

25. What do you think are the biggest opportunities ahead of us in this space?


Level Up Your Fundraising Process

26. If this company were to go public, what would you expect the fundraising history to have been? What would you expect about the future financing and dilution characteristics of this business?

27. I’d like to fill in this round from a few smaller checks from angels and advisors. Can you think of anyone who would be dynamite to advise me on getting this going even if you don’t invest? (Make it clear that you’re not asking for an introduction.)

28. Other than you, who would you recommend being the best type of investor for this type of business? Does anybody come to mind? I’m not asking for an introduction.

29. If you had somebody else helping you evaluate this company, whose opinion would you trust?

30. I understand that statistically, the chances of you investing in this company are only 1%-10%. I don’t want an intro, but I’m just curious, who else would you expect I’m talking to about raising capital?


Fundraising Checklist



The Right KPIs

31. What’s the main metric that would prove that this is going to be a great business?

32. What sort of traction metrics would make investing in this business a no-brainer? Where does this company sit on the ladder of proof based on what you know?

33. What experience have you had with companies that try to distribute on the channel(s) that I’m planning to use? And what were your lessons with companies working with that channel?

34. When this company is worth $2B and we look back, what do you think the likely path is that the business would have taken to get there?


How Your Team Measures Up

35. On a scale from 1 to 10, how much do you think we have founder-market fit or founder-product fit?

36. What attributes do we need to be excellent at to make this business work? What are the skillsets and expertise where we need to be world-class to succeed? E.g. Digital marketing expertise, being a supply chain guru, etc.

37. Just meeting me, do I feel like the kind of person to make this business work?

38. When you look at the team that I’ve assembled here, how would you compare them to other investments that you’ve invested in?

39. Talk with me about the team you see here. What are the pros and cons of the team I’ve built so far?

40. Who would you like to see me add to this team in the next year?

41. What are the top cultural characteristics that this company would need to have to be successful? Being aggressive? Careful and frugal? Highly compliant? Breaking the rules? Sales driven? Tech driven?


Collaborate As Equals

The best Founder meetings I have are collaborative discussions instead of one-way pitches. They feel like conversations between equals. It’s potentially the start of a 7-10 year collaboration to build a business together, and Founders and VCs should both understand that this relationship starts with that very first meeting.

In asking VCs questions about your company, have the confidence to listen to criticism without succumbing to the impulse to go on the defensive. You have to overcome your fear of rejection and failure to get the most value out of the fundraising process. If you’re able to do so, it elevates your status in the eyes of the VC because it signals confidence. It also demonstrates your commitment to being a fast learner.

VCs are a resource. They are pattern recognition machines that have been trained by thousands and thousands of data points from the startups they’ve seen. They’re a strategic wellspring of the startup ecosystem that is there for you to avail yourself of. If you ask the right questions, VCs can help calibrate your business, help you avoid costly mistakes, and ultimately get your startup to become the best version of itself and maximize your chances of success.

It all starts with asking the right questions.

Connect with James Currier

The 10x Advantage of Starting a Company Right Now

10X Advantage NFX

by Gigi Levy-Weiss. Gigi is a General Partner at NFX, a seed-stage venture firm based in San Francisco.

10X Advantage NFX


Many of today’s most prolific companies were founded during a downturn. This is now widely understood and backed by data.

But what is not well known are the deeper reasons why they were able to get a strong start in a bad economy. Why starting a company now—when it seems most perilous—gives you a serious lead on incumbents and smaller competitors.

In a downturn, all the advantages that startups inherently have are magnified 10x and many of the advantages of incumbents have become liabilities.

When you can see the underlying conditions in clear detail, it is indisputable that:

  1. Starting a company now puts you at an advantage, and
  2. Waiting to start a company after the chaos clears puts you at a disadvantage.

Let’s examine why this is true.


Incumbents are in a (historically) weak competitive position compared to startups

Think of a downturn as a bumpy road full of potholes, and incumbent companies as big cars. They are very efficient at carrying lots of things and people from Point A to Point B on smooth roads. But they can’t easily swerve when the road is bumpy and full of potholes. Startups, by contrast, are more like little, zippy bumblebee cars. They can swerve, adjust, and change direction quickly. They can drive on tiny roads that would be unnavigable for big cars. In a downturn, that small bumblebee can get from Point A to Point B faster and more efficiently. There are specific reasons why.

1. For incumbents, assets become liabilities.

In today’s compounding crisis, many assets that once benefitted incumbent companies are now large liabilities. For example, offices and leased data centers have become unwanted financial burdens. Deals and partnerships that are no longer viable can suck up money, time, and energy. Companies focused on minimizing the weight of these liabilities tend to slow down or halt efforts to pivot, or open new lines of business, or test new products.

By contrast, startups are smaller, leaner, and have fewer assets to slow them down. They usually don’t have costly or long term leases. No thousand-person teams or cultural entropy. It is also easier for startups to jettison deals and partnerships that are no longer useful. Simply put, startups don’t carry the heavy burdens of their bigger competitors. They come with less “baggage” which allows them to address new opportunities and iterate more quickly to meet customers’ needs. Startups can take advantage of little-noticed market trends, move more quickly, and think more creatively about how to solve customer problems.

2. Incumbents must focus on core business lines rather than innovation.

Even during the best of times, incumbent companies struggle to create new growth opportunities and embrace innovation as they’re forced to maintain their core businesses. This is a natural reaction and nearly impossible to overcome. Faced with a choice between the known and the unknown, risk-averse big companies will pick what they know. If making a decision between a cash cow product line (even if the cow is limping) and a speculative new business unit (which is starting at $0), the cash cow always wins.

Consequently, growth and innovation efforts are quickly deprioritized or even fully abandoned. Incumbents place their primary focus on stopping the decline of existing revenue streams rather than creating new ones. This mindset slows them down even more during crises and tethers them to mature and declining business models.

That’s why right now, startups have even more room to maneuver in and around (and even beyond) their bigger competitors than in “good” times. Startups can try more things without attracting a response or even being noticed. It also gives Founders time to iterate and test more, granting more runway for one of the holy grails of startups: product-market fit.

3. Incumbents cannot easily upgrade their talent pool during a crisis.

When the COVID-19 crisis first hit, incumbents started laying off employees. This was a classic move to downsize and reduce payroll liability. Because incumbents have many more employees than startups and are often held more tightly accountable to public markets or investors, they have by necessity continued to bleed jobs. Unfortunately, this often means terminating talented employees.

Again here we see a great opportunity for startups to move in and hire new talent quickly, often at lower salaries. In troubled industries especially, startups can easily recruit experienced talent away from incumbents because employees are uncomfortable with the risk of sticking around during a decline. This new reality changes the risk/reward calculation dramatically in favor of startups — for the relevant employees. It also increases the relative and absolute rewards that an employee can access when joining smaller, younger companies. This is powerful leverage that smart Founders use to pull in top-grade talent.

4. Incumbents cannot easily respond to disruptive startup tactics.

No matter if you are a startup or a big company, it’s possible that now may be the best time ever to open source your code or offer your premium service for free for an extended period. The trouble is, the ability to greenlight experimental changes like these can often take incumbents months and involve numerous stakeholders — even during good times. During bad times, incumbents simply do not have the internal bandwidth to respond or the corporate courage to make risky changes.

Let’s look at how this plays out. When a big company wants to open source code, they need to consult their legal team, check with their VP of Engineering and CTO, defend the strategy to the rest of the company, allocate budget for dedicated developers to support that code, and accept the potential immediate decline in revenues. Not to mention figuring out how to market their decision to their customers and community. In a startup, Founders and their small engineering teams just make a plan and open source the code. Done! There is far less bureaucracy and far fewer boxes to check.

For making big shifts to pricing, incumbents have to check in with their CRO, see how it might impact existing renewal pipelines, and revamp sales rep compensation. But for startups, giving away the premium version of their product for six months instead of 30 days could be just a smart customer acquisition strategy — and often only takes a few lines of code to change and the Founders’ decision.


17 Qs to Ask in a Downturn


How to pick a field for your startup in a downturn

If you’re thinking about starting a new company right now, it’s important not to get caught up in conventional thinking about how to size a market or what type of business to launch. In a downturn, just about any type of business operates at an advantage as a startup. Here are some of the dynamics you’ll want to consider.

1. Disruption and market change are accelerated.

Generally speaking, the startup opportunities you were exploring prior to the downturn are still intact. That’s because the underlying drivers of innovation are still at work. Better, they are moving even more quickly.

For example, the digitization of manual business processes was a good business model before the pandemic. Now it’s an even better business model. Computational biology was important before; now it’s supercharged and getting even more funding. Online coaching and education, previously growing well, are now becoming a powerful new normal as society struggles to imagine new ways to educate. All businesses across every industry are looking at becoming more resilient to quarantines and social distancing, more able to handle another shutdown or crisis.

2. Some of the best opportunities lie in the hardest hit business sectors.

Even the fields that look the worst right now—like travel—will not disappear. They meet a market demand or a fundamental human need. Instead, the most challenged sectors will reappear in a different form. This is a perfect opportunity for startups to try new ways of approaching the most damaged fields and get ahead of incumbents.

Let’s take, for example, live music and concerts. People will not crowd into stadiums for a long time to come. Perhaps that means the time for VR or better versions of virtual concerts is finally here. Maybe amazing new audio codecs could make it sound like you are actually at the concert. Or setting up experiential packages of VR plus merchandise plus food delivery can create a virtual concert experience that in some ways is even better than the real thing. Already some artists we know are experimenting in new ways to connect with fans. People are far more likely to be willing to try something new during a downturn when so many social and business practices are undergoing dramatic change.

3. Think creatively about fulfilling fundamental human needs in new ways.

One of our NFX portfolio companies is the recreational vehicle (RV) marketplace Outdoorsy. The company took a huge hit when the downturn started. Everyone everywhere was afraid of any kind of travel. Now, Outdoorsy is actually doing better than ever. It’s a fascinating story of secondary opportunities from a crisis. The initial reaction of most people was not to travel because they felt unsafe on planes and in other shared transportation. They also felt unsafe in hotels and places where they could not control their surroundings. Yet, the desire to travel remains. Humans need to get away from their everyday surroundings and see the world.

Outdoorsy did a great job with an innovative PR campaign pushing the message that RVs are a great way to keep traveling. It clearly resonated. Now, investors are starting to look at RVs as a new asset class for generating income. This resembles what we saw with AirBnB. First the initial opportunity, then people started to see the value of it as an asset, then came cleaning businesses and other services like tools to optimize homeshare pricing. Even the shift to RVs is a secondary impact that few people expected. It’s not a safer airline or a cleaner hotel room. RVs are an entirely different thing.

The emotional drivers behind human behaviors are constant. Where we are forced to change those behaviors, business models that can fulfill fundamental emotional needs in different and innovative ways can be huge winners.

4. Look for secondary and tertiary opportunities that come from changes in behavior and consumption.

The rise of the RV market is just one example of a secondary opportunity that generates tertiary opportunities. To find these opportunities, Founders must look beyond first-order impacts, which are already crowded. (How many new video conference technology companies have launched since March 2020?). Take the simple handshake. People are no longer shaking hands. And they may not shake hands much ever again. But the social ritual of greeting remains important. What could replace it and what opportunities might that create? Or in travel, the first-order impact is to stay away from planes and hotels as people fear the virus. The second-order impact is to shift travel to open spaces where we are safer—for example, national parks—or to reduce the density of our experiences by creating ways for smaller groups to enjoy the Taj Mahal. So a third-order opportunity might be offering group VR tours of the Taj Mahal with your friends powered by drone-mounted cameras streaming real-time video. The first order is obvious. As you move into the second and third layers, there is more room to try new things and iterate on new business models.

In general, the field has never been this wide open for startups to take on incumbents or to try out entirely new business ideas and approaches. People are more open to change than they have been in many years. This means they will try new things and change their consumption patterns and behaviors. For Founders, this presents a historic opportunity to tap into massive shifts and build something unique, durable, and scalable.


Frameworks for Startup Ideas


What can Founders do right now more easily than before

Common wisdom holds that now is a tougher time to sell to customers and grow a business, test ideas, and get product-market fit. But in fact, good Founders will find that these core activities required to grow a startup are actually easier in a downturn.

1. It’s easier for startups to iterate for product-market fit.

A new startup does not have a fully-developed product with all the technical debt or sunk costs that an incumbent or even an older startup company has. This clean slate means that a fresh startup can build its product to better fit current customers’ needs. The clean slate is especially important during a time of massive change. You may need to iterate a product multiple times until you feel you have properly captured what the customers want — and what they want may be very different from what they wanted only six months ago.

New startups also may have longer to achieve product-market fit than in good times because there is less pressure to rush a product to market, burn rates may be lower, and incumbents are less likely to launch competing products. All told, this may be the best environment to achieve product-market fit in recent history.

2. It’s easier to get sales meetings and trial customers.

The move to Zoom and other video platforms has made it easier to get sales meetings than ever before. That’s because Zoom has replaced in-person. The barrier to getting a Zoom call scheduled versus an in-person meeting is much lower.

During downturns, it’s also easier to get people to try your product. Just like you might be willing to try new foods when you are on vacation or are visiting a new city, shifts in behavior caused by COVID-19 have made it easier to break through and talk to people. Beta testing a new product can seem more relevant if it promises to improve a user’s life or entertain them in a concrete way.

Some of this is simply due to people having more time. Business travelers are no longer traveling. Teams that formerly ran field marketing, direct mail or other disciplines impacted by COVID-19 may be looking for new ways to accomplish their job effectively.

3. People are psychologically more open to new things.

Consumers are also looking for new things to do. They used to go out to eat, hang out with friends, or go shopping. Now they are spending more time at home. They want to feel alive and feed their brains. They want to see friends and listen to new music and try out new recipes — often at the same time. COVID-19 dynamics are likely driving usage and membership spikes of products like Houseparty and Masterclass. Consumers using those services want to find new ways to spend time together online and new types of online experiences.

The good news is new experiences can lead to new habits — and habits stay for the long term. It’s like when you move to a new city or you start at a new school or a new job. You are more open at that moment to changing your habits and preferences. And you are more likely to share what you find with others. This gives startups a tremendous opportunity to leverage this desire for new things to create new, sticky behavior, and consumption patterns.

4. The VC math for early-stage startup fundraising remains intact.

Isn’t it impossible to raise money during a downturn? Not really. Fundraising continues at a healthy pace. We are busier than ever looking for good investments. In fact, VC interest in finding attractive investments is at an all-time high by some measures. While there remains debate on the absolute level of funding, no one disputes that good teams with solid ideas can still get funding.

VCs love to invest in a downturn because startups have better economics in a downturn. As costs have gone down for many business services and salaries, Founders can achieve more with less capital. Lower prices allow smart startups and Founders to enjoy longer runways or to dedicate more resources to growth than was possible before the pandemic.

5. Starting a company during a crisis creates a culture of speed and shared purpose.

Starting a company in a crisis is trial by fire. Founders will have fewer resources. You will have to operate leaner and more efficiently. To survive and win big, Founders will need to move faster than before, setting the speed bar at a higher level. Teams will need to function more efficiently. Every employee will need to do more and be better at their jobs. The sense of shared purpose created by conditions of adversity is a powerful cultural force. When the COVID-19 crisis recedes and more normal conditions return, these attributes and performance expectations—the DNA of your company—will allow you to break away from competitors.


What to Pay Attention To If You Start Right Now

  • Understand what fields are changing and try to gain insight into important trends affecting those fields. You need to see over the horizon and anticipate what the world will be like in the near future. Keep in mind the crisis is probably accelerating the pace of these changes. The future may come sooner than industry experts forecast.
  • Find the right frameworks for your new company. Now is the time to focus on the true ‘painkiller’ — product-market fit.
  • Try your ideas quickly to ensure you identified the right trends and are building the right painkiller solution. No long cycles. Talk to your customers as the first step.
  • Other people who think times are too chaotic will self-select out of the running. Use the chaos as your smokescreen while you start something new.
  • A final word of advice: Make sure you think carefully if starting a new company is really what you want. And if it is — move fast. Speed is more important now than ever.


Connect with Gigi Levy-Weiss

Announcing The Founders’ List

Founders's List NFX


Founders's List NFX

Today we’re launching The Founders’ List — audio essays from the most prolific leaders in technology, selected by the Founder community. These are short, 15 minute-or-less audio versions of critical insights on how to build, design, & grow startups from the Founders and leaders of companies like Instacart, Dropbox, Facebook, HubSpot, Trello, Stack Overflow, & more.

Our inaugural group selected for The Founders’ List includes:


We’re also sharing audio versions of iconic memos in tech history, like:


In startups, speed and network are your biggest advantages. The Founders List quickly unearths the wisdom behind the products that have defied odds and defined the future, as told by the Founders and leaders themselves.

To nominate someone for The Founders’ List: Each week, we’ll be releasing a new audio essay or memo selected by the Founder community. Nominations are rolling, and can be submitted below:


For more tools & resources on building iconic companies, check out: The NFX Founder Resources

Below are resources from NFX that Founders have found especially helpful for network effects, marketplaces, growth, & more.

  • The NFX Culture Manual: We found or wrote playbooks for growth, sales, product, engineering, testing, and so on. But we’ve never found a quick, tactical resource for building high-performing cultures. This is that resource: a simplified playbook for a low-time commitment approach to laying the foundation of exceptional company culture. Get the culture scorecard here.
  • The NFX Marketplace Scorecard: We’re often asked by Founders and other investors what we look for in marketplaces. It depends, of course, but there is an internal methodology we use to invest or advise a marketplace: The NFX Marketplace Scorecard. This is the system we use to score marketplaces. The higher the score, the higher the potential of the marketplace. Get the marketplace scorecard here.
  • The Network Effects Bible: We’ve identified 13 types of network effects, each with their own playbook. For Founders looking to build truly impactful companies, few areas of expertise are more valuable. See below.




Media Marketplaces and the Future of Digital Media

Media Marketplaces OG

by James Currier (@JamesCurrier). James is a General Partner at NFX, a seed-stage venture firm headquartered in San Francisco.

Media Marketplaces OG

Media marketplaces are businesses that monetize attention.

They connect content producers with audiences. Sometimes revenues come from advertisers, sometimes audiences pay, sometimes both. The first media marketplaces were newspapers that ran ads starting in 1625.

In the most recent 20 years, digital media marketplaces have become some of the most iconic names in consumer tech. You might not think WhatsApp and Netflix are in the same category, but they are when you look at the underlying mechanisms.

Because people continually long for novelty and new forms of content, media marketplaces are still possible to build.

Now is a great time to build a media marketplace. Not only are the audiences now in the billions, but subscription-driven media marketplaces are becoming viable again. Evolving payment options on mobile and the ease to connect with micro-markets through other media marketplaces make subscriptions newly powerful.

Are micro-markets interesting for creating iconic companies? Sure. Photo-sharing for college students looked like a micro-market when it first started.

Today, we want to give Founders the frameworks to empower the next generation of media marketplaces.

Even if you aren’t building a media marketplace, seeing how they work and the frameworks beneath them will help you better understand the world we live in today.


Marketplace Glossary


The Unique Network Effects of Media Marketplaces

Media marketplaces are unique because they have two layers. On the surface level is a “content marketplace”, where content is the supply and attention/views/traffic/eyeballs are the demand. This looks like a normal 2-sided marketplace.

But an ad-driven marketplace adds a deeper layer, where the audience is actually on the supply side. Their attention is what demand-side nodes — i.e. advertisers and content producers — want. The addition of advertisers brings a third side to the marketplace. Your marketplace goes from matching content producers with audiences, to matching content producers and advertisers with audiences.

Ad-Driven Media Marketplaces


Of course, there’s a downside to this ad-driven model. 3-sided marketplaces are less durable than 2-sided ones. Why? Because for the content, attention is demand. When the advertisers “steal” part of the attention, the core marketplace gets less of it and becomes weaker. This is why ad-driven media marketplaces have to be careful about ad frequency.

3-sided marketplaces also make it harder to solve the Chicken-or-Egg problem. Imagine you spend a year creating good content. You make it live, and a lot of people come to see it for 2 weeks while it’s a hot topic. For you to sell ads against that traffic might take months. You never close the loop on the 3-sided market and you never have a business.

This is why video creators publish their videos on YouTube — YouTube has the 3 sides of the marketplace already — and why TV show creators sell their shows to the networks like ABC, Fox, or Lifetime. The audience and advertisers are there first, meaning that the demand and monetization model are already in place, which is why content producers come to them.

Multi-sided networks have indirect network effects, where the addition of same-side users (e.g. content producers) who you think would be competitors for attention, indirectly benefit other content producers via direct cross-side network effects that bring in more of the other side of the marketplace, the audience.

In a sense, interestingly enough, both of those types of nodes — audience and content producers — are on the supply side. Demand is the advertisers. Pretty unique dynamics that make the platform more volatile.

Another way to think about it is that the more sides you have to a network, the more indirect the network effects — meaning that the value of the network will be harder to start, will grow at a slower rate, and unravel at a more rapid rate.

This is a big reason why subscriptions present an opportunity. They simplify the network effects to two sides. Content as supply, a paying audience as demand. Simple two-sided marketplace. This is why magazines and newspapers had both subscription and advertising revenue for so long. The subscriptions were a more simple, more stable revenue stream.




The Key Attributes of Media Marketplaces

Media marketplaces describe a wide range of companies across many media formats. There are several core elements along which they differ. What’s surprising is that there are many combinations of elements that will win. It’s important to understand why these elements are significant and how they fit together so you can navigate more accurately.

The broad range of types of media marketplaces fall in different places on the spectra of several key elements.

Media Landscape

Monetization: As we’ve said, you can choose, ads, subscriptions, or both. We are now seeing a decided shift towards mixed or subscription monetization. This will drive a lot of opportunity for the next wave of media marketplaces.

Spectrum ---Ads to Subscription

Content production: Some media marketplaces simply list the inventory of third-party suppliers. Example: early Netflix. Some create all of their own content, like the NYTimes. And almost all evolve over time. Netflix now competes with its suppliers in producing content. The degree to which media marketplaces are involved in the production of content varies both between companies and between the same company at different points in their life cycle.

For media marketplaces, curation is another important dimension here — open marketplaces vs. selected content. YouTube doesn’t curate much, but Netflix does. Twitter will curate their acceptable ads, Facebook holds a policy of curating less on ads.

Spectrum - Pure Marketplace to Content Producer

Utility vs. Entertainment: Pure utility media existed pre-internet — directories like the Yellow Pages, or newspaper classifieds, for example. Companies like Google and Craigslist perform similar functions online. Their content is focused on delivering useful information. Other forms of media, like videos and gaming, are more explicitly entertainment. “Mixed” infotainment like podcasts and news media lie somewhere in between.

Specturm - Utility to Entertainment

It’s important to understand these different spectrums not only to understand the media landscape today and where there might be gaps to fill, but also because to succeed media marketplace companies must constantly evolve.

The Founders who succeed in running media marketplaces will be the ones who are not afraid to reinvent their whole business periodically.

Take Netflix for example. They started out with DVD delivery and then changed to online streaming. But as their margins started to shift, and third-party content producers began to pull back from their platform, Netflix had to pivot once again and move towards producing content themselves. Radical shifts and they are still on top.

Facebook, as we’ve written about before, is another example of a media marketplace that is undergoing constant and continual change. The key is for Founders to understand the options available to them and know when to shift gears.

Marketplace Scorecard


The Evolution of Media Marketplaces

Before the internet, subscriptions drove revenues for media like cable and magazines, while other media like broadcast TV and radio were more reliant on advertising. As a result, there was a mix of two-sided and three-sided media marketplaces, but no direct network effects in media.

Internet technology led to a seismic change in media because user-generated content was now suddenly possible. The Internet, for the first time, allowed for many-to-many media – what later became known as “user-generated content.” This turned the audience itself into content producers.

Companies of the late 1990s and early 2000s like JibJab, BlueMountain Arts and (which I founded) were the early pioneers in turning audiences into content producers by giving them templates for creating content. These early templates let the users customize and personalize a library of pre-built content.

However, these companies never passed the $1B valuation mark because they didn’t build sufficient retention and thus defensibility. They didn’t build direct network effects around the UGC. They created experiences that remained largely about the content and not *enough* about the network of people creating the content.

In addition, they didn’t scale well because their templates weren’t open enough. These early UGC templates were like coloring books that you color in once and leave. More content-rich templates required these pioneer UGC companies to continually produce more templates to keep users engaged, which served as a bottleneck to growth and retention.

1990s + 2000s, which we built, for example, allowed you to create and send quizzes to your friends. We needed to hire 50 employees, including 5 psychology and statistics PhDs, to continually build new personality tests. We called this the “fresh produce” business, and it was a tiresome treadmill. It had good viral effects, but no network effects, and thus no retention, and thus no defensibility. BuzzFeed is a more recent digital media marketplace that has similarly suffered from the fresh produce problem in the last decade, also using quizzes.

Although at Tickle we had gone part of the way towards turning our audience into content producers, we couldn’t completely extract ourselves from the production process until we moved into social networking, a more open UGC template that didn’t need to change once built, and shifted us to focus on the network of people more than the content exchanged between the people.

Our use of that template for Tickle Social Networking happened at the same time as LinkedIn, Friendster, and MySpace, and 18 months later, Facebook.

This was the big breakthrough — to build a direct network effect among your audience so they stay around and make content for you for years. Then you can take your time in bringing in the advertisers to put ads against the attention.

This new approach unleashed the direct personal nfx into the media world. It’s an atom bomb. People are still not understanding what this means for how ideas and information move in the world, as we argued here.


It’s interesting to note this trend towards more open-ended, blank canvas templates for UGC. When YouTube started, there was a 10-minute video template, and Twitter started with a 140 character limit. It was less restrictive than what came before because it was just open fields but more restrictive than now (280 character limits for Twitter and unlimited video length on YouTube). You can see the simple open text field of WhatsApp as an even more open UGC template than the FB template.

These changes in the 2000s gave rise to the iconic media marketplaces that eventually became dominant today — Facebook, Instagram, Twitter, Snap, WeChat, etc. But despite leveraging UGC and direct network effects, they needed to remain 3-sided because they relied on advertising to monetize.

While still technically complicated 3-sided marketplaces, these businesses are dramatically simpler to operate and to rapidly scale because your audience IS your production, so you effectively remove one of the three sides of the marketplace from an operational perspective.

The 2020s will see the next evolution of 2-sided media marketplaces, driven by subscriptions.


Companies like Patreon, Steam, Blizzard (World of Warcraft), Disney+, Epic Games (Fortnite), The Information, NYT Digital, and Substack are examples. They connect audiences with content they are willing to pay directly for.

As magazines experienced in the 1950s – 2000s, the subscription model allows you to cater to micro-markets because a smaller audience base becomes viable when they are paying directly through subscription instead of indirectly via ad impressions.

We also expect the move in consumption patterns to move away from ad revenue media marketplaces to games. As Netflix famously said in their quarterly report in 2018 that Fornite and other games were bigger competition than Hulu and HBO.

We expect the trend to subscriptions to continue and to help give rise to the next generation of transformative media marketplaces.


Making Ads the Content

If you can get your ads to look like content to your audience, so much the better from a business perspective.

Craigslist is the best example because the content IS ads. It simplifies the operation of the marketplace dramatically. Genius, right? It’s no wonder that newspaper classifieds were the financial backbones of the newspaper industry for so long — they were free content for the newspaper that people paid them to list.

With classifieds, people pay you to give you content. That simplifies nearly everything. The advertiser and content creator are the same thing. We call Craiglist a utility media marketplace.

Google search ads are another close example of a utility media marketplace and shows again how the lines between ads and content can blur. Like the unpaid search results, the paid links at the top of the search results page often give useful information to searchers. At the beginning of Google, the difference between the free search results and a paid ad was clear. Over time, to drive revenue, they have become less differentiated. My dad can’t tell the difference at this point.

Influencers on Instagram or TikTok embedding products in their entertaining videos or photos is another example of how ads can be content, and vice versa. On Instagram, the ads work well for fashion because fashion and apparel ads are so similar to the organic content already on the platform.

Lucky Magazine, launched by Conde Nast in 2000 is another example. It’s essentially a magazine of ads.

Another example in reverse is YouTube. One of the reasons video ads are working so well on YouTube is that because users are allowed to skip the ads, it forces advertisers to create ads that are fun to watch. The ads are thus also good content.

If you’re able to make your ads valuable or entertaining, that simplifies the operations of your marketplace and makes ad revenue the right option.


14 Questions for Media Marketplace Founders

  1. Is your media marketplace two-sided or three-sided?
  2. Are you going to generate revenue with ads, subscriptions, or a mixture?
  3. How much can you make your ads entertaining or valuable content?
  4. Does your team produce content or does the content come from suppliers outside your team?
  5. To what extent could your audience produce content for you?
  6. If so, what are your templates for user-generated content?
  7. How open or narrow are your UGC templates?
  8. Can you create a direct network effect on the content-generation side (like FB and Twitter)?
  9. Do people come to your marketplace to be entertained or to get utilitarian information?
  10. Can you identify a new media unit, a new format, a new template?
  11. Can you identify new utility content?
  12. Can you identify a new bundle of content that makes sense in a subscription?
  13. Can you identify a piece of content that could be unbundled to attract many users?
  14. Can you identify exclusive content which will attract many users?


Building the Future of Digital Media

World-class Founders who understand the nuances of media marketplaces will have a great decade in the 2020s.

At NFX, we’re looking for media marketplaces in their many forms to disrupt existing media players to launch iconic new media properties. Come talk to us.

Thanks to my Partner Gigi Levy-Weiss for contributing to this essay.


Marketplace Scorecard

Connect with James Currier

How VCs Judge Your Startup (on Zoom): 15+ Tactics Behind Successful Fundraises

How to Pitch Your Startup Remotely

In our essay on how VCs decide to take a first meeting, we wrote that “a typical VC might get introduced to 1,000 companies per year, meet with 200, and invest in 4.”

But 2020 is not a typical year. It has ushered in a new remote era for the startup ecosystem, changing the nature of fundraising meetings and decision-making. VCs are now evaluating companies without ever meeting in person, and Founders are adapting how they get connected to investors — and pitch them — as a result.

To help Founders better understand this new world, we asked top VCs what successful tactics they’ve seen Founders use, as well as how they’ve altered their own investment processes.

At NFX we have long believed that Founders deserve a better fundraising experience — one that is tech-enabled. That moment has arrived.

Now, the Founders who excel in networking, pitching, & fundraising online will have the strong advantage.


Gigi Levy Weiss, General Partner @ NFX


Request short meetings, and invest in high-quality video + audio

The way to get meetings hasn’t changed — the best still manage to get warm intros. It does seem, though, that with more time at home and more research time, the quality of the cold emails I am getting has improved. They are more researched and personalized, which is good.

A new tactic I’ve seen is to request very short meetings. I now often get requests like ‘give me 15 min to demo the product and I am sure you would love it’. Before, that would have sounded like a strange request in a physical meeting world (why would the Founder settle for 15 min if they are making their way to find me?). But it’s a valid suggestion today. And, as it’s a smaller request, I say yes to more such requests than I did before.

Pitches essentially remain the same, but this new presentation arena has forced them to be more effective and more concise. The video medium gives more control to Founders and allows them to better control their pitch — which I think is a plus.

On the flip side, they can’t demonstrate their energy, jump to the whiteboard, or read my body language — all these are bad both for me as an investor and for them as they “normalize” everyone to a similar energy level and body language.

Top Founders are coming ready with many more backup slides (as it’s tough to draw on the whiteboard), are demonstrating their energy on the pace of speech, and are moving between different presentation modes.

Many Founders are also becoming more aware of the importance of their video and audio quality and are investing in tools to make sure it’s high quality. This makes a big difference.

Running through a full deck is not easy on video, so more smart founders are sending the deck ahead of time and asking what I would like to discuss in the call. That’s very helpful too.

Last thing: in many first meetings it used to be just the CEO. Now with the low burden of the video (not having to travel to the investor’s office), many teams are showing up 2 or 3 Founders to the call and are much better coordinated on who is presenting what. When executed well, it’s a great improvement to a solo meeting.

5 tells I look for in video calls

As I am not able to read as many tells from the people I meet remotely vs. in person (such as how they walk in, how they say hello to the other people in the office, do they take their glass at the end of the meeting, etc.), I use a few methods to try and fill in the gaps:

  1. I check how well they prepared for the video meeting and look at the quality of preparation as a tell sign — including video and audio quality, backup slides, etc.
  2. While the Founder will be trying to control the flow, I will be asking questions and taking the discussion in the directions I care about more, not just to get the replies I need but also to see how the Founder is dealing with the changes.
  3. When a team is showing up, I will pay a lot of attention to the team dynamic when hard questions are asked. The way the team handles the stress is very important and is very visible over video.
  4. I would take the time to do further video meetings with other team members who I might not have met in person. Even if it’s for 5 minutes each. In a way, I’m going wider (meeting more people) where it’s tougher to go deeper (having intimate discussions face-to-face).
  5. Last but not least — I continue having small talk before the meeting (the first few minutes) as if it’s a face-to-face meeting. Many founders are surprised that I don’t just jump into the discussion — but the small talk tells me as much as the actual discussion does.


The 3 Types of Pitch Emails

Gigi’s lessons from The Brief, the tool to pitch your company to top VCs

  • There are 3 types of pitch emails I get: Generic, Superficially Personalized, and Truly Personalized
    a. Generic emails: It’s very clear when the Founder sent the same email to 50 or even 500 different investors. When I get something like this, I’m unlikely to be interested. It shows a lack of understanding of the fundraising process, which hints at broader ineptitude with sales.
    b. Superficially Personalized emails: The first sentence or so may be personalized to me. This gets me across the line to at least read the email.
    c. Truly Personalized emails: These are the types of emails that get the most attention from investors. It shows the Founder has put the work in to find out what I’m investing in, what I value, and embed this into the email they’re sending me.
  • An email that worked for getting the meeting: A Founder once wrote me a full analysis of my investments which were adjacent to their startup, and explained why it made sense for me to invest in them as a result. This really made me want to meet them, even though I ultimately didn’t invest.


16 Non-Obvious Fundraising Lessons


Mark Suster, Managing Partner @ Upfront Ventures


Focus on getting access, getting a “yes” & making an impact

It’s clear that social norms have changed as a result of Covid-19. Given how few investors are actually meeting people in public, it can be daunting to figure out how to get access and how to build a relationship over time with a VC when you know you’re not going to just bump into them at an industry event or conference.

The first thing I’d like to point out is that many investors ironically have more time available for meeting Founders because they aren’t spending time commuting, flying on airplanes, or attending conferences. At the same time, while VCs have more capacity to meet, they are also pretty ‘Zoomed out’, so it may be harder to get a VC to want to commit to yet another video call. So here’s my quick advice on how to get access, how to get a ‘yes’ for a meeting, and how to make an impact.

Getting access: Investors are inundated with meeting requests and have to make decisions about whom to meet and who unfortunately will not get a meeting. If an investor has to spend too much time thinking about whether to meet you or not, the chances of getting a meeting are greatly reduced. That’s why introductions are so critical. If a founder whom I already respect suggests I meet with you, the chances of my saying ‘yes’ are much higher because I’m taking advice from somebody I already trust. It isn’t that hard to network with early-stage founders, so my advice is to spend your time getting to know founders who have raised Seed & A rounds from VCs and over time earn the right to get introductions.

Getting a yes: If a VC assumed he or she would need to allocate a full hour to meeting you, the chance she says yes is greatly reduced. So make sure that you ask for an ‘introductory meeting’ in which you promise for the first call to be short, sharp and to the point. Offer a 30-minute meeting but don’t schedule anything for 45 minutes behind that in case he/she wants to run over. Have a game plan for how you want to use all 30 minutes in a high-energy, thought-provoking discussion.

Making an impact: I already gave it away — make an impact! Make it very clear early in the discussion what you do and why it matters. Practice your pitch so that it’s high energy and has a narrative. Have your points be staccato so that an investor can jump in to ask questions, or make a point themselves. In the meeting, inform the investor of your planned time frame for fundraising and your planned process. Close the meeting by asking whether your company fits the criteria of what the investor is looking for and how this pitch resonated or not with the VC.

What you’re doing is forcing the investor to think about how they viewed you and by verbalizing it out loud they also begin to think about that themselves. If it’s not a good fit, better that you know now. If they think it’s a good fit, then ask for a next step. My preferred ask would be, ‘Do you mind if I email you a short update with how we’re doing in 4-6 weeks from now?’ This is your hook to stay in touch and to earn the right for a second meeting.

Remote relationships are easier to build than I expected

As an investor, you would imagine it would be harder to make investment decisions without meeting teams in person. In some sense, this is true because we don’t have the ability to “kick the tires” of the office and staff and get a sense of the team and culture. But for Seed and A-round investors like Upfront Ventures, in many ways, I find the current environment easier to evaluate investments.

As a starting point, it is much easier for both parties to agree to have 5+ meetings in rapid succession to iterate around various topics of discussion because each meeting doesn’t require a commute or a commitment to a full hour. These fairly intimate conversations (on a Zoom, looking into each other’s house) actually help with rapport building, which is critical to evaluating — in both directions — whether or not we want to work together.

The hardest thing for me to evaluate is the interplay between founders. In a group setting, I often ask questions and then watch how the founders interact with each other. So much about the success of an early-stage business is the founder-to-founder dynamics, so this is critical. But having less insight here is accommodated for when I’m able to get to spend more time getting to know each founder individually.

In general, I find the remote relationship building much easier than I had expected.

How to find the right VCs for your startup (Mark’s lessons from The Brief)

  • One of the most valuable things that Founders have is your time. Yet when people go out and fundraise, they often just take random introductions and start taking meetings. I don’t recommend this.
  • There’s an old saying: “measure twice, cut once.” The amount of time you put into pre-planning your own fundraising process really matters.
  • As an example, here’s how we fundraise ourselves, as investors:
    1. First I look at LPs and try to qualify the ones that have invested in funds our size. I start with a list of 800 names — you can get databases of who VCs are — and create a reduced list of investors who’ve invested in funds similar to mine.
    2. Then I look for places where I know somebody who has raised money from them directly, call them up and ask them if they think they’d be a good fit for me.
    3. I create a qualified list based on that feedback and only then ask for introductions.
    4. Finally, I look for subtle cues along the way to qualify investors further based on who leans in. It might mean that 2 out of every 3 drop out, but for the one that leans in I have a much better probability.
  • Important: Never take a meeting that’s not based on an introduction. If someone sends me a high-quality introduction, when I start the meeting, I’m leaning in, thinking “this is going to be great.” If I take a meeting without a quality introduction, I tend to start the meeting leaning out.


Ladder of Proof



Ann Miura-Ko, Co-Founding Partner at Floodgate


How to think through Founder/VC Fit

While so many things in life have changed during shelter-in-place, I’ve found that it has given renewed focus to what matters — both personally and professionally. For founders approaching venture firms for financing, this is a great opportunity to make sure that there is a fit between the investors’ interests and risk profile with what a founder is trying to accomplish. The better a founder has thought through this fit, the more likely they are to stand out. I have moved to a model where often I will first ask a series of questions first.

  1. How much are you raising? As a founder, if you are raising a $10M Series A and you’re looking for a partner to lead this round, we are not going to be the right partner for you. This is an easy pass. For Floodgate, we are looking for pre-seed or seed as our core sweet spot writing checks that range from $350k to $3M.
  2. Where are you in the process? If you need an answer today, you are better off talking to angel investors. Since we are typically lead investors, we generally need about two weeks from first meeting to get to term sheet. Even with the efficiency of Zoom meetings, we actually will want to get to know you as founders and would expect you to want to do some diligence on us. Make sure you leave enough time to get to know the investors who will be on your cap table.

Showing that your startup is venture-backable

These next few questions are more about your core business and tells me the narrative of who you are and — very importantly — why venture capital is the right financing mechanism for your business. It also tells me a little bit about why seed stage investors will be rewarded for the risk they take in investing in your business.

  1. Why this? Of all of the things you could be working on, why choose to work on this? I like to understand the narrative of the founder and what has caused them to commit to this business.
  2. Who is on your team? What are they experts at?
  3. Insight. I like to spend a lot of time here learning about the founder’s insights, which generally tells us if something is venture scalable or not. It also tells me if a seed investor has any business investing in the business at that stage or not. As Jeff Bezos said in his congressional hearing statement recently, “Outsized returns come from betting against conventional wisdom, but conventional wisdom is usually right.” What is the piece of conventional wisdom you’re betting against and what do you get for the risk that you’re taking? In other words, you generally have an insight about the market, technology, or regulatory space — that most people may not know or understand — that gives you a massive advantage / acceleration into the market if you are right. What is this insight? (By the way, many founders are left scratching their head when early-stage investors say they need to see traction. This is just another way of saying you don’t have a unique insight, so there is a lot of potential competition in the landscape. The only point of differentiation ends up being traction.)

It is actually quite rare to get exceptional and thoughtful answers on these questions. I feel that this perspective is probably more timeless than just focused in a time period where we are all on Zoom. That said, the reason I bring these points up now is that I think focus is becoming more important. Rather than casting the net wide, you want to make sure that there is a great fit, right up front. We should all be going for the no as quickly as possible so that we can get to that heck yeah when it matters.

Find out if the VC has a passion for the space (Ann’s lessons from The Brief)

  • One of the most important factors to whether or not I want to take a meeting with a Founder is if I have personal passion for what they’re pursuing.
  • That can be hard to tell from a Founder’s perspective, of course, because there might be new areas of investment that an investor is looking at.
  • The problem with me investing in a space I’m not passionate about, especially at the really early stage, is that I basically want to be co-conspirators with our Founders — and if I feel no passion or love for the idea, that’s going to become an obstacle for me becoming a true co-conspirator.
  • My interest in the space is also linked to how large I think the market is.
  • Also relevant is how authentic the story of the Founder is relative to the problem that they’re trying to solve. If it’s a problem that you whiteboarded while you were brainstorming startup ideas, it’s probably going to be a little less compelling than where the Founder found authentic pain through their own personal experiences.


Charles Hudson, Founder & Managing Partner @ Precursor Ventures


Founders have adjusted to the new normal of remote fundraising

We have been investing in Founders on Zoom and the phone since the beginning of Precursor, so this isn’t particularly new for us. Ironically, our standard meeting is a 30-minute Zoom meeting for first introductions, which is the same as it was prior to SIP.

I do think that pitches, where people have a good setup (good lighting, a good microphone, and audio and a strong Internet connection), goes a long way. I like a simple deck with a clear story presented by the Founders.

I think Founders have really adjusted to the new normal. In general, I think people have standardized on Zoom plus the deck, and I think that new normal makes it easy to be consistent across meetings.

The one thing that does feel different is that we have been able to compress the time spent in between meetings, in some cases, because nobody needs to travel to have follow-up meetings.

Being ‘in the room’ is not a priority

Maybe we are unique on this front, but we have never prioritized being in the room with Founders as part of our investment process. In a way, this has been a relief to be in a world where lots of other people are coming to terms with this and the need to get comfortable making decisions where they don’t have the in-person interaction as a crutch.

Be realistic about your target VC list (Charles’s lessons from The Brief)

  • It’s really important to be honest and realistic about the list that you build when you go out to fundraise.
  • A lot of the times I meet with Founders who have this dream list of investors, many of whom, given the stage, they’re at with their business, are just not appropriate.
  • I think there’s a lot of wasted effort going after big-name firms to lead a seed round (for example), where for most of those firms that just isn’t their core business model.
  • You might get the meeting, but I would argue that time is better spent pursuing firms whose business model is to invest in early-stage companies that have the characteristics of your business.
  • A lot of Founders when they bring me their list of target firms, at least half of them are aspirational. You’ll get the meeting, but they’re not going to invest. Your time is better spent elsewhere.


The Fundraising Checklist


Hunter Walk, Co-Founder & Partner @ Homebrew


Learn to switch deftly between pitch deck, conversation, and product demo

Homebrew has always welcomed pitches from outside of our local Silicon Valley market and has taken plenty of cold inbound emails (vs. only meeting with founders who can find a warm intro), so to be honest, the Zoom era hasn’t really changed the initial tactics used by entrepreneurs to connect with us. Additionally, we know that the last few months have thrown teams into working environments that can be random and chaotic, so a founder should never apologize if a child or pet leaps into the frame during a pitch.

My advice to founders would be to not hide behind the presentation of a deck, but rather to send materials in advance, encourage the VCs to read them (we do!), and then use the live meeting as a hybrid pitch/discussion/demo. Deftness moving back and forth between pitch deck, conversation, and a product demo takes a bit of practice. Also, if you’re going deep on a particular topic and need to convince someone of your position or explain a complex topic, you should get out of screen share slide mode, and get back to seeing faces.

It’s easier to set up meetings, but harder to observe Founders interact

Two immediate changes come to mind when considering how we’ve shifted our investment decision-making process.

  1. First, because there’s no expectation of meeting in-person at our office or theirs, we just jump on a call or video for a few minutes if there’s a follow-up question or chat, rather than thinking about the scheduling-lag and commitment it takes to ask someone to make a physical journey to see you again. Maybe you could say we’re scheduling in microbursts. I can imagine retaining aspects of this even when we’re all “back to normal”.
  2. The second area we’ve been intentional about is trying to make sure we have at least one conversation where all the cofounders are attending, which doesn’t always occur if there’s a ‘divide and conquer’ strategy going on during a particularly frenzied fundraise. Traditionally we’d all be together at some point in the process — whether for a pitch or grabbing a casual drink to talk over a term sheet or some other bonding moment. With a purely virtual investment model, you miss some of that personal interaction and as investors, we also don’t get to observe the subtle interactions between co-founders that might occur during a meal or a more relaxed setting.

So as best we can, we’ll try to get the Founders together for a virtual conversation (vs. straight-up pitch) and even sometimes do a happy hour (or morning coffee) together over Zoom as just a ‘let’s put away the deck and see if we actually enjoy being together.’ Social distanced walks can help too but we don’t want to assume everyone is comfortable with that (or isn’t also watching their kids, etc) so it’ll never be something we require.

What the perfect pitch email looks like (Hunter’s lessons from The Brief)

  • People always want to know, “what does the perfect pitch email look like?”
  • I want to see personality conveyed through an email. That’s kind of hard when you’re cutting and pasting the exact same message and sending it to 100 people.
  • So maybe put a little bit of thought into who you’re emailing (at least that first paragraph), and why you’re interested in “Hunter at Homebrew” (for example) vs. another fund.
  • Show, don’t tell: provide a link to your product, feedback from early customers or beta testers, names of people you’d hire / a stack of resumes you’ve sourced off of craigslist even ahead of having the money to hire…something that says “this already exists and I’m asking you to join my company” vs. a generic email and a generic deck that says “if you write me a check, this company might exist”. That’s a big difference.
  • Try to tell me a little bit about what you’re working on, what stage you’re at.
  • Please personalize it. The more information you give me, the better reaction, the more feedback I can give you.
  • Whether or not it’s something I’m going to invest in, I might be able to at least make an introduction or give you another piece of data that’s going to help you tailor that pitch for the next person you talk to.


Sarah Tavel, General Partner @ Benchmark


Founders in the remote era are fundraising with more intentionality

To successfully fundraise in the remote era, if anything, it feels like founders are approaching the fundraising process with more intentionality. They are better at thinking through how to sequence the process. How to make sure they have the right introductions. Having a deck prepared.

References matter more now than ever

To me, the biggest change has been an even greater reliance on backchannel references. This is because I find it difficult to really get to know someone over Zoom. Staring at each other on a computer screen creates a formality and distance versus what you’d be able to get in the more open-ended setting of a coffee or meal together.

I miss being able to do that. I just closed a new investment in a company, and I seriously can’t wait to meet the founders in person for the first time.

What VCs are Really Looking For in a Pitch Deck (Sarah’s lessons from The Brief)

  • When I was an operator, I was told about this framework: problem, solution, result. I find that to be a really great framework for understanding how to structure a pitch deck.
  • I look for a clear articulation of a problem that needs to be solved, why you have the right solution (and that includes the team), and what the early results look like.
  • I add a fourth category for a pitch deck, which is why you want to raise more money and what you’ll accomplish with that.
  • One of the subconscious things I’m looking for in the presentation of a pitch deck is quality and clarity of thinking in the articulation of those 4 things.
  • As an example, if a Founder uses a vanity metric, where they talk about something growing (downloads, MAUs, or whatever it is), and it’s not actually the metric that gets to the core of what a company’s doing, that deflates my interest.
  • What I really want is someone that’s really getting to the heart of what they’re trying to do.


Mike Vernal, Partner @ Sequoia


Always be reading the room, and start the conversation early

Pre-COVID, we already routinely met with companies via Zoom, so it hasn’t been as large a change as it might seem. I think two things are even more important in a Zoom-only era.

First, you really need to read the room. In person, it’s easy to tell if you’re losing someone via their body language. If you are just talking at a set of slides on your computer, it’s much harder. Make the slides smaller and make everyone’s faces bigger.

My other piece of advice would be to start the conversation early. Our aim is to deeply partner with a few companies each year and it’s hard to build the relationship — on both sides — if you are trying to do it in a single week. Often founders get the advice to try to create urgency / FOMO and push through a financing as quickly as possible.

We can do all of the intellectual diligence quite quickly, but we think it takes time to really get to know someone and that’s doubly hard in the age of COVID. We are much more likely to lean in if we’ve had time to get to know the founder and understand the business.

In the COVID era, references are critical

We rely a lot more on references to understand what it’s like working with the team. We’ve always valued references — we can easily do 30+ references on a single company before we decide to partner — but I think they’ve become even more critical in the era of COVID.

We also encourage founders to do the same. The kinds of partnerships that we strive for often last 10-20 years. It’s important for both sides to get to know each other early and do their homework.

How to stand out to VCs as a Founder (Mike’s lessons from The Brief)

  • Starting a company is an incredibly challenging process and there are a lot of ups and downs along the way, so one of the things that we really look for in Founders is grit, determination, and an implacable spirit.
  • When meeting teams, understanding the adversity that the team has gone through and the way they’ve powered through that adversity is really important.
  • One of the things we’re proud of at Sequoia is the number of companies we’ve backed that have been founded by first or second-generation immigrants. People who’ve come here in search of a new life and have a dogged determination to create something out of nothing that I think we really respect and admire.


Fundraising Tools for Founders:

At NFX we build software for Founders that makes fundraising faster and more transparent. These are the tools we wish existed when we were Founders. They’ve now been used by thousands of Founders and VCs to successfully get connected, get informed, and get funding.

  • Signal – A who’s who of investors, organized by people, firms, sectors, and even interests
  • VC Match – Find the right VC for your company
  • The Brief – Every question VCs want to know, in the format that will get you the meeting.

Why Your Work Matters: Darwin, Machines, & the Future We’re Building

George Dyson NFX

by James Currier (@JamesCurrier). James is a General Partner at NFX, a seed-stage venture firm headquartered in San Francisco.

George Dyson NFX



When I first read George Dyson’s book “Darwin Among the Machines”, it changed my thinking on startups. At the time I was running a startup. And, like most Founders, was busy with the details. Heads down. Trying to create a thing. Dyson’s book, however, gave me a broader perspective about how what my team and I were doing fit into the bigger story arc about humanity and technology. Dyson provided me with an answer that I believe every Founder must find if they are to build anything of consequence: What is the meaning of all of this?

As a Founder, having a strong sense of direction, purpose, and context for what you are doing every day gives you an advantage. Finding the deeper meaning gives you speed and power.

Founders — and founding teams — should understand that they are part of a long line of technologists and builders who set the stage for what you are doing now. Since Alan Turing and John Von Neumann invented the first digital computer with a memory that worked at the speed of light (rather than speed of sound), our community, this long line of technologists, has been building on that foundation just as stonemasons built cathedrals in their time on top of a cornerstone. It was a group effort, built over many decades, where one artisan might spend their life working on one corner of a tower while someone else worked on the floor. It was the collective effort that built something meaningful.

Understanding your role as part of a community building the future — not just a lone Founder on a solo journey — is the deeper connection that will get you through the really hard times. Like pivots, and downturns, and cofounder splits. And even pandemics.

This pandemic, when seen in the macro picture Dyson paints for us, serves to reinforce our calling as Founders. As Dyson says, we’re in the middle of a Black Swan event. We thought everything was continuing to rush forward, and then suddenly — we hit a limit. Conditions changed. New needs and mindsets arose. This can be seen as a natural part of the evolutionary process. From a technology point of view, we may actually be living through a very positive inflection point.

Your work matters. But to see how it does clearly requires us to step outside of the caves of our day-to-day lives of running startups to understand how we all got here, and where we’re going. There is a rich history you are building upon, and your work — whether a corner or floor of the cathedral — is a foundation that others will build on as we collectively build the future.

My conversation with George Dyson is one I hope every Founder gets to hear. Below we’ve excerpted some of the key discussion points. Dyson is an exceptional mind. His perspective brings light to our greater purpose in building new technology.

His new book is called Analogia. It’s a semi-autobiographical reflection on how analog computation is re-establishing control over the digital world. and comes out in mid-August 2020.


The Origins of Our Digital Universe

To kick off the conversation, George brings us back to the world of Alan Turing, who with John von Neumann invented one of the first digital computers with a memory that worked at the speed of light, rather than the speed of sound. This was the tipping point for how the digital computer began to explode as a creative movement after WWII.

  • Here’s to the crazy ones
    Turing was an abstract logician. My father (physicist Freeman Dyson) told me he read Turing’s “On Computable Numbers” when it came out in the 1930s and thought it had no connection to reality at all. It was an interesting piece of mathematics, but one would never have expected it to completely change our tangible day-to-day world. Obviously, it did.
  • A Crisis Accelerates Innovation
    Turing ended up in the middle of World War II, as all great scientists did. The Germans were using digital codes to communicate with a U-boat fleet. So the race to answer the question of ‘Could one machine imitate the behavior of another machine?’ became very influential in saving England and the rest of us during the war.

    • Note: Turing’s code-breaking acumen has been credited with ending World War II two years early and potentially saving millions of lives.
    • Von Neumann was working on the other side in America, on the atomic (and later the hydrogen) bomb problem.
  • The Invention That Changes Everything
    • Von Neumann made Turing’s one-dimensional model two dimensional, producing an address matrix where you give two coordinates like a chessboard, and that gives you a memory location. We absolutely take this for granted now, but it changed everything back then.
    • 53 is a number that sort of always stuck in my mind. I was born in 1953. And in 1953, there were just 53 kilobytes of this high-speed memory on the entire planet. That was it. Then it just exploded from there.




Google Builds Turing’s Cathedral

In 2005, Dyson went to visit Google and realized this was the very future that Alan Turing had envisioned, only much greater. Because of that visit, he wrote his seminal essay, “Turing’s Cathedral.”

  • Google was building a new way of life
    • When Dyson visits Google, an engineer expresses confusion about why publishers were angry about Google’s efforts to digitize books. The engineer said the books were being digitized not to compete with the publishing industry, but so the coming AI could become intelligent by reading everything we’ve written.
    • Dyson realized this was a whole community of people who already believed in the future he had predicted in his earlier book “Darwin Among the Machines”.
    • At the same time, virtual worlds were emerging like Second Life (James was on the board of Second Life for 5 years).
  • Google was not building Turing’s “mansion” – it was building Turing’s cathedral.
  • In a way, Turing answered the critics in advance when they said: ”Why are you trying to create intelligent machines? You’re going to get in trouble. Only God can create intelligent machines. Are you going to create artificial souls?”
  • Turing said that we are no more creating intelligent machines than humans are when we create children. He said, “We are only creating mansions for the souls that only He – and he used the capital H – can create.”
  • Visiting Google was a revelation for Dyson. He realized, at that moment, that Google was building something even greater. They were building Turing’s Cathedral.
  • Google was a group effort in the same way cathedral building was.
  • Old cathedrals were built over hundreds of years. Nobody really laid claim to any part of it. You might spend your life working on one corner of a tower and someone else would spend their life working on the floor. And then after a few hundred years it was finished.
  • When James read “Turing’s Cathedral”, it made him realize that as a Founder he was one of the stonemasons of this movement.


We Are Stuck in An Old Model

  • Everything still exists in a 2-dimensional matrix
    • What’s surprising to me is how little things change. Turing and von Neumann developed this model, and it worked, and we’ve just been stuck in it ever since. Everything still more or less exists in this two-dimensional address matrix. It’s just expanded, but it’s still that every bit in the digital universe has a von Neumann address.
  • We still don’t see clearly
    • Finally, we’re starting to see shifts away from that model. But no one has come forward like Turing and given us a formal description of what this new model will be. We’re just stumbling around discovering it blindly. It is coalescing, but we don’t see it clearly yet.


Startup Timing


What We’re Getting Wrong About AI

Dyson called Turing’s famous paper, “Computing Machinery and Intelligence” the founding document in the quest for true AI. But what are people still getting wrong about AI?

  • Don’t give your AI a name
    • What we’re doing wrong is we’re anthropomorphizing AI. There’s this search for AI and then there’s the search for extraterrestrial intelligence. I think we have both of these wrong.
    • My personal third angle on that is the search for other intelligent creatures on Earth. I spent a lot of time on the Northwest Coast among killer whales, who I firmly believe are highly intelligent. It’s a non-human intelligence, and we have trouble communicating with it.

We tend to assume that the other intelligence is going to be like us. And we look for language and things like that. I think that’s a dead end. Other kinds of intelligence are going to be other kinds of intelligence.

  • A captive AI vs. a wild AI
    • We’re getting very good at building imitations of our own intelligence in captive systems. I’m much more interested in wild AI that will evolve on its own and be very different from us.
    • It may operate on a completely different timescale. There’s no reason that other intelligence has to operate on our timescale. It could be operating much faster or much slower or in non-carbon or in completely different ways; perhaps not using language the way we use language at all.
    • AlphaGo is interesting because, if you watch a couple of really good Go players, they’re sort of almost non-human anyway. It really is an alien way of operating. So getting a machine that can do that is a very interesting step – a different flavor of intelligence, right on the edge of what humans naturally do.


The Spooky Flaw of The Turing Test

  • Intelligent enough to not reveal its intelligence
    • Turing’s paper is famous for what we call the Turing test, which is this idea that you can determine whether a machine is intelligent by having a conversation with it.
    • I believe exactly the opposite. The test of a real true AI would be intelligent enough not to reveal its intelligence to us. So the fact that we don’t have machines that pass the Turing test is no proof that there are not intelligent machines.
    • Note: Dyson is a huge skeptic about discreet artificial intelligence, that we will ever have this system in a box that you can put in your car that will do everything.
    • In terms of a distributed artificial intelligence, Dyson is a believer. Because with a distributed system, you have an opportunity for evolution, for it to find itself and to learn on its own.


Have Our Expectations of AI Come True?

Context: James reads to George a passage from his “Turing’s Cathedral” essay and asks if what George wrote has come true:

“For 30 years, I’ve been wondering what indication of its existence might we expect from a true AI? Certainly not any explicit revelation, which might spark a movement to pull the plug. Anomalous accumulation or creation of wealth might be a sign, or an unquenchable thirst for raw information, storage space and processing cycles, or a concerted attempt to secure an uninterrupted autonomous power supply. But the real sign I suspect would be a circle of cheerful, contented, intellectually and physically well-nourished people surrounding the AI.”

  • Google is a machine that takes care of people who take care of it
    • The above passage was written after Dyson’s visit to Google in 2005. It was like a magical kingdom at that time. People were getting their hair cut in the sunshine. There were swimming pools on the campus, daycares for kids.
    • There was this incredible sense of, “Here’s this machine that is absolutely making life paradise for the people who take care of it, making them wealthy and keeping them healthy, taking care of all their needs.”
    • That would be exactly what you would expect if you’re going to have a real AI — people taking care of it would in turn be taken care of.
  • The caretakers change, at scale
    • At that time Google really was a horizontal rather than a vertical company. Everybody was in contact with each other.
    • Of course, Google is different now. Now you really do get a sense that the sort of rules and regulations of the company are very thinly below the surface. It’s become much more organized. It has to be.
    • At its current size, you can’t have the happy playground that they had.


The Dark and Risky Side of AI

  • Moving into a new phase: For love or for money?
    • The fact that people’s lives are being increasingly controlled and regulated by AI can be scary. Right now it’s generally and often in a positive way — but it’s very easy for that to shift the other way.
    • James feels the focus on money has shifted the way the field is developing. Amazon is now worth $1.5T. As wealth has risen, the focus on the philosophy / purpose tends to get pushed to the background. That’s why he wants to connect Founders to their larger purpose.
    • In 2005, when Dyson spoke at Google, there was still a connection to the origin myth of Turing and Von Neumann and their work — it was all about the pursuit of knowledge.
    • The personality of those folks working on AI now is much more driven, with intent, and also money-conscious. It seems we are moving into a new phase.
    • For AI particularly, the cycle is much faster. People used to stay in academia working on AI for many years. Today if you build any academic AI group within what used to be the ivory tower in no time at all, it usually gets acquired or spun out as either a company, or as part of one of these existing companies.
    • This is not necessarily a bad thing, but it’s something to be careful of.


How Are We Humans Doing with Technology Today?

  • Not seeing where we’re going
    • That’s not just the technology side, but also the biotechnology side, which everyone talks about the same way that we talk about computing.

We’re completely disoriented. Flying blind. We still can’t really see where we’re going.

  • Genes and computers speak a similar language
    • Full scalability of editing genetic information opens an entirely new world. In the language of genetics, the machine language of cells and the machine language of computers are much closer to each other than to human language.
    • James mentions his podcast episode with Trevor Martin, CEO of Mammoth Biosciences, the largest IP repository of CRISPR IP (and an NFX company). There is a whole set of new risks and opportunities.
  • The tail wags the dog
    • One way of looking at it is that we are using life and we’re building these biotechnologies. The other way to look at it is exactly the opposite way around – that life is using our technologies to build better, more distributed forms of itself.
    • As Harari notes in Sapiens, we did not cultivate wheat but wheat cultivated us to serve its own purpose.


Will Technology Continue At The Same Rate?

  • It’s surprising how human nature stays the same
    • When asked about Kurzweil’s view of exponentially accelerating technology making the future nearly unrecognizable, Dyson strongly disagrees with Ray Kurzweil. “The things he is hoping for terrify me, and the things he’s afraid of don’t scare me at all.”
    • Of course, we’re in the middle of this very interesting Black Swan case where we thought everything was just rushing forward and then suddenly we hit this limit — a good old-fashioned novel virus.
    • It is a virus that has learned to live and adapt and survive among bats -mammals that live by the millions in caves. That’s how we humans live.
    • What we need to do is stop acting like bats and get out of the caves. But we’re not. Across the street from me is a bar. That bar is now full of people. They’re just flying back into their dark cave.
  • Crisis as a call for change
    • From a technology point of view, this may be a really positive inflection point – the reset or reboot. Amazon is doing great. Some systems are adapting to this very well, and other institutions like your local bar are not going to do well. But it’s a huge, unexpected shift.

Huge shift: We’re Now Building Analog Computers with Digital Infrastructure

  • Digital vs. Analog
    • The fundamental difference between analog and digital computing is not what you use to compute. You can have digital computers made out of wood, and you can have analog computers made out of silicon. The difference is in what you are doing with the computer.
    • In digital computing, the information is in the logical sequences of bits. Every bit has an exact meaning. So in digital computing, you’re using discrete functions.
    • In analog computing, you’re computing with continuous functions. For example, continuous functions could consist of values, such as voltage and relative pulse frequency, or relationships, such as what we see in social graphs. (Note: George wrote about this in greater detail here).
  • What nature reveals about computing
    • In nature, we see this very clearly divided. Nature has learned to use digital computing, which is very good for error correction, in our genetic systems. Genetics uses digital computing to correct the errors from one generation to the next, or introduce the errors that lead to improvement (evolution).
    • In nature, all real-time control is done with analog computing because it’s much more adaptable and robust. There is no programming. There is no algorithm.
  • The reverse is happening now
    • After World War II, we had all this analog equipment lying around – surplus vacuum tubes and radar screens, and so on. And this very small group of oddballs put that analog equipment together and realized Turing’s vision of digital computers.
    • Now, this has sort of gone full circle, and the reverse is happening. We have an infinite amount of digital computing; it’s effectively free. A lot of companies and a few individuals are starting to assemble that equipment into big analog computers, where the meaning and the information is in the continuous functions rather than discrete functions.
    • For example, the YouTube network doesn’t care what the bits actually say; it just cares about the magnitude of the stream of bits and the frequency at which things connect. What they care about is how many people are watching that video and how frequently; they don’t really care what the bits are.
  • The next stage in our evolution
    • Digital revolution brought us where we are, but it won’t stay that way.

Information is now in the topology of the network rather than the actual meaning of the code. For the same reason it works so well in nature, it works very well in these large systems we’re seeing like Google or Amazon or Facebook.


A Message For Today’s Founders

  • Startups with purpose can do remarkable things in short periods of time
    The remarkable thing about Turing’s Cathedral is that the group of people who I so admire and wrote about conceived of the project, found the money, built their own workbenches, built the machines, built the computer, and solved these nuclear weapons problems, and started working on climate and weather and everything else. They did all that in less time than it took me to write about it.
  • Look back at these heroic efforts and learn
    The pandemic crisis is the same thing. It’s going to push biotechnology the same way World War II pushed physics. Everybody’s working on this biological problem now. And that, in the end, will have all sorts of secondary effects.
  • P.S. Dyson just finished a new book called Analogia: The Emergence of Technology Beyond Programmable Control. It’s in some ways a sequel to Turing’s Cathedral. What we talked about earlier, this transition from the digital revolution back to an analog revolution, that’s the theme of the book. And then there are some very prophetic but possibly dark views of the future…

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