VC as Talent Agency

There are two functions that I want to see a venture firm provide to portfolio companies that are new and atypical.

Most firms build their tribe of entrepreneurs and deal-referrers through social and educational events for portfolio executives, friends of the firm, and industry experts. These programs can be as simple as a backyard BBQ at a GP’s house or as structured as True University. Tools can be as low-tech as a CEO dinner, or as cutting-edge as private Q&A applications at 500Startups and First Round Capital. The primary result of these activities is brand building in the entrepreneurial community. The principal benefit is keeping a firm’s deal-flow network warm. This is vitally important, however, portfolio companies do not win or lose because of an expert talk on product/market fit.

Most firms can recommend a proven bookkeeper, or a known professional recruiter. Firm preference dictates whether services like these are presented as a suite of resources in the Andreessen Horowitz ‘talent agency’ model, or as a quieter more traditional referral in the Benchmark model. Further, good firms can provide business development and sales introductions.

The first function that I want to see offered to portfolio companies is a hiring process concierge. This is specifically not a professional recruiter function. Recruiters, whether paid by portfolio companies or by investors generally play a filter role. Entrepreneurs who are the best recruiters work the opposite way. They invest substantial time in identifying and actively pursuing potential hires at all levels. They take special care to examine a potential hire’s online presence and write long, thoughtful cold emails to prospective candidates selling the mission of the company and the potential fit for the candidate. I was recruited by Kevin Merritt to Blist/Socrata in this way. It is astonishingly effective. Most CEOs do not think they have the time for this and professional recruiters do not have the credibility among developers and technology professionals to execute this strategy. Under about 50 employees, founders don’t need a recruiter, they need a hiring process concierge who can research and ghost write prospecting communication for founders to send and then make sure that founders follow up with the best and most responsive candidates.

The second function that I want to see offered is infrastructure code, approach and decision sharing among portfolio companies. It is extremely common for startups around the time of their Series A to spend several months paying off technical debt and building out common infrastructure pieces like an internal user to user messaging system with cascade to email with user preferences or an automated test and deploy system with monitoring, zero down-time deploys, feature flags and A/B testing. Portfolio CTO get-togethers are not enough to prevent each company from having to reinvent its own wheel. Shared code repositories and cross-company educational code reviews that include integrations of third party components like payment providers would save expensive time. 

Product Market Fit Poker

Product Market Fit Poker from Matt Johnson

Earlier this week, I was fortunate enough to be able to give a talk on Product/Market Fit (& Poker) at 500Startups. My (sparse) slides are embedded here.

When you are running a startup, each week, sprint, month or quarter you make an assessment about what cards you are holding and then choose how much to invest in either top-line growth and scaling, or 'figuring-it-out'. I like to think about each assessment and investment period as a hand of poker. The only problem is that it's generally not clear what cards you are holding.

The answer is measuring product/market fit. If the market is really ready for your product, then you should be pushing all of your chips into the middle of the table and scaling like crazy. If the market isn't quite that ready, you'd be a fool to do that. The trick is that measuring product/market fit is no easy task. Marc Andreessen, who coined the term, not only said that 'nothing else matters', but also that 'you know it when you see it'.

This difficulty has not stopped a number of smart and accomplished entrepreneurs, investors and marketers from developing a series of useful metrics and rules of thumb that get at the notion of product/market fit and can help entrepreneurs know what cards they are holding at each round of decisions and resource investments.

Thanks again to 500 for hosting me!