In his most recent essay, influential investor Andrew Chen wrote at great lengthabout the maths involved in venture capitalism. He refers to a recent survey by Silicon Valley-based VC firm Andreessen Horowitz, whose findings are succinctly summarized in the graph below:
The conclusion to be drawn is straightforward but significant. Successful venture capitalists possess a nose more keenly attuned to the sniffing out of home-run potential investments, as opposed to considering steady long-term gains. The evidence shows that most investors will hit upon a similar number of losing investments over time. The difference comes in how those top venture capitalists leverage the huge successes.
The Flip Side of the Graph
However, let us consider for a moment; is it possible we are simply interpreting the data from the wrong perspective? If investors
Perhaps, a focus upon increasing a portfolio’s overall success rate over time - a metric that currently shows little variation across different sectors - would have allowed opportunity for another, under the radar home-run to naturally mature and reach its full potential.
The Investors’ Weak Spots
Venture capitalists, incubators, and angel investors can offer a great deal of value beyond monetary funding. The best are certified experts in their field. Their ability to introduce you to prestigious business connections can prove invaluable. They are well versed in the art of the sales pitch and oftentimes, they can offer assistance and professional advice on highly complex issues.
These groups certainly have a lot to offer, but with that being said, it is undoubtedly safe to admit; many investors leave a lot to be desired when it comes to the fine art of chaperoning a new startup through the early product development process. Surely, the greatest startup ‘killer’ is the inability to transform an innovative and potentially life-altering concept, into a workable product which users will adopt.
Investors play their part. However, their attention is usually divided between you and the rest of their extensive portfolio. It is oftentimes impractical for a large investor to take a truly active role in any one company’s day-to-day operations.
What the F*ck is Product Strategy Anyway?
If this is a question you’ve found yourself asking yourself in the past, you are in luck. It just so happens, I wrote
On the flip side of the coin, we have the budding startup company. One rarely possesses such a luxury. While corporations are playing a slow game of chess, startups have no choice but to become adept at the game of poker. Why poker and not chess? Similar to the game of poker,the number of cards we don’t see in business, far outweighs the ones we hold. The variables are always stacked against us. In such a game It would be utterly impractical to believe we could win every single hand. The key is to play with strategy. We will leverage our strengths, we will seize the opportunities, we will avoid past pitfalls, and most importantly - win or lose- we will strive for progression with Every. Single. Hand.
Investors, simply lack the scope to look over the shoulder of any startup as they play each and every vital ‘hand’. Without that critical support, that experience, that expertise, the odds are likely to be stacked against the startup.
A New Way of Thinking
So, now we know we cannot expect our investors to support us every step of the way. What should we do? Do we have the luxury of falling over and over again until we get it right? We know that a strong product strategy is vitally important to any startup. We also recognize the importance of acting before it is too late. So what now?
What if there was a different way? A path less taken? One built on a new way of thinking. A rationalism that values not only short-term home-run potential but also those who can clear first and second base. A strategy that could lead to long-term stability and even a higher ROI.
That, is where a CEO coach can impactfully assist. The seasoned play caller in the dugout, the card counter behind the champion player. Someone with the experience, but more importantly, the dedication needed to support and guide you the CEO, where YOU need it most.
Yoav Yechiam is a 4 time founder and startup CEO, Product Strategy consultant, Mentor and Coach. He’s the managing partner at The Product Alliance, a startup focused, strategic consulting firm. Here are a few of his