Lessons from Boris Wertz, Partner at Version One
1. "Generally speaking, there are two ways (and only two ways) to scale a business to hit that $100 million threshold:
Your business has a high Life Time Value (LTV) per user, giving you the freedom to spend a significant amount of money in customer acquisition. High LTV can usually be found in transactional or subscription businesses.
Your business has a high viral co-efficient (or perhaps even a network effect) that lets you amass users cheaply without worrying too much about the monetization per user or spending money on paid acquisition."
2. "Never, ever outsource something that is core to your business. Outsourcing a core function may give you a short-term uplift, but it also means you fail to build the expertise within your company. If you want to build a sustainable competitive advantage, you simply can’t outsource your core functions to another who may not be as invested in your success. In other words, you can’t build a great company on an outside agency’s stuff.
The number one marketing priority for any start-up is to figure out a clear communication strategy for the brand and the product — the message must be simple, clear and differentiated. Users must understand right away what problem the product solves and why they should use it and engage with it. And hopefully you also take this communication opportunity to show a bit of personality!"
Some startups make complicated products that add friction to user life without bringing much value. Keep it simple.
3. "Too many start-ups fall into the pitfall of running experiments for the sake of running them, and then never actually learn anything since the parameters were too fuzzy. Drive your activities toward reaching tangible learning milestones…as many as possible, as fast as possible."
Data is not everything. You need to have a good experiments framework to get relevant data and insights about your business and your customers.
4. "To be wildly successful, you cannot sacrifice your long-term vision for short-term success just as you can’t sacrifice your current product and customer base for your long-term vision."
Boris said that you need think about innovation in start-ups in 3 time horizons: short-term, mid-term, long-term. Short-term innovations are incremental, mid-term you need to make bigger bets and long-term you need to define a new market category.
5. "Course changes happen all the time and can lead to brilliant things. But when pivoting, you need to completely separate your old and new businesses. Approach your pivot as if it were a completely new startup. Then see which pieces of your current setup (people, product, etc.) can potentially help you accelerate the new opportunity."
If you need to pivot, pivot hard.
6. "The entrepreneurs who succeed always have a unique perspective as to what is world-class — they don’t limit their perspective to what is best in Canada. It’s a super-important benchmark to always have in mind. Today you have a worldwide market. There are no national barriers any more."
Competition is now global and it’s important to benchmark against the best. However you don’t want to lose your focus; like Fab.com did when Rocket Internet started a clone in Europe.
7. "Amazon was, from the beginning, the natural buyer. But it took a long time: nearly three years from when negotiations started until the deal closed. So the major lesson is that you can’t plan for an exit. Stay focused on building a really great business. I’m not interested in founders that think about an exit right away. I want people to think about how to build a great stand-alone company."
You don’t know what will happen in the future; Building a great business and not looking for an exit too quickly is a way to protect yourself against shit that can happen along your startup journey.
8. "One key message that can apply to any start-up is to never end a meeting without a decision (unless everyone determines that more data is needed to make that decision). If a meeting begins to succumb to groupthink and indecision, you need to ask why we can’t make a decision today instead of another day. After all, you just need to move forward."
As you scale you will become slower, but it’s still possible to Move Fast and Break Things.
9. "Here’s the principle that I’ve really started to embrace. Ask yourself the following: If you look back at this decision 10 years from now, which path will you most regret not having taken?"
Boris wrote that minimizing regrets is a good way to overcome decision paralysis.