vc-culture
Early-stage companies are obsessively focused on growth,[1] usually at the expense of retention. That methodology is backwards, because retention should be the north-star metric of any early-stage product. If someone builds a great product that users keep coming back to, it will be easy to figure out how to grow it (raise money, spend money on acquiring users, ask users to share it, etc.) (Location 1733)
Marketing a product with a low NPS is essentially saying to potential customers, “Hey, my product sucks, come check it out.” (Location 1738)
Ironically, this is one the core tactics of growing slowly. It's finding a formula that works, and then deeply questioning if adding new processes will cause more harm than good.
Learn how to validate an idea with as little time and financial investment as possible. Do you have a plan to validate your ideas cheaply? (Location 439)
This can come off as very tech bro circa 2019 speak where the idea is more about hype than actual delivering.
The Silicon Valley "cart before the horse" is that raising $n million will propel any bad idea to a working state by hiring more people, getting a nice office, etc. This is brittle and wholly untrue, or at least a facade of inorganic growth that gets whitewashed into a catalyst argument.
The Principal Agent Problem:
Only 1.5 percent of the purchase price goes directly into your agent’s pocket. So on the sale of your $300,000 house, her personal take of the $18,000 commission is $4,500. . . . Not bad, you say. But what if the house was actually worth more than $300,000? What if, with a little more effort and patience and a few more newspaper ads, she could have sold it for $310,000? After the commission, that puts an additional $9,400 in your pocket. But the agent’s additional share—her personal 1.5 percent of the extra $10,000—is a mere $150. . . . It turns out that a real-estate agent keeps her own home on the market an average of ten days longer and sells it for an extra 3-plus percent, or $10,000 on a $300,000 house. When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise. (Location 872)
I had an experience like this in NYC where it felt like my broker was trying to offload me into an apartment as quickly as possible to get their cut and move on to different clients.
In general, I try to avoid working with people who have conflicting incentives to my own.[1]
one of the reasons I avoid VCs -- their incentive is effectively opposite of a founders ↩︎
Hypothesis: The unit economics of the machine learning space LLM 2020's startups are not similar to the social networking space in the mid-2000s. This will create a five year vacuum in VC's expecting returns
Why?
- Metcalfe's law is at play for people-run networks, but interfacing with LLM is a single player game
- Computers are bought for their GPU number crunching ability, not their ability to serve data to millions of users instantly
- Most of the cost is upfront during training period
- Correctly built AI companies will slowly/quickly drive out middle management related work, decreasing the need to hire employees to scale/build/market a project