Principles

Over the past few year I’ve started to accumulate a few “principles” that I try to live by. There’s been additions and subtractions to this list over that period, so I wanted to write down my current status - to have something to benchmark against in the future. So in no particular order, here they are:

Don’t cheat: Applicable to both professional and personal settings. For work; don’t try to trick (create fake urgency, nasty terms etc) founders into agreements they might regret later once they get more knowledgeable about the fundraising side of business. It’s not fun to win that way, and more important you win short-term but lose long-term. Outside of work the same: it’s no fun winning unless you actually deserve it. No moral shortcuts.

Founders pick me, not the other way around: My job is to find the best possible founders to invest in. I don’t believe I have special abilities to spot opportunities broadly compared to others, meaning I’ll find founders others might to. The way I get to do good investments is by being a favorable options for those I want to work with. And hence I work to be just that.

I work for the founders, not the other way around: Rule number one: don’t do any damage. Rule number two. Be helpful. Best way to do both is to consider myself a helper to, not a manager of, startups.

Have fun: Whatever you do make sure you enjoy it. It’s the only way to stick to something long enough that you get really good at it.

Be good: Karma has a tendency to bite back. Also, you never know what battle any other person is fighting. So always try to be good.

Work hard: I don’t believe in only smart work, especially if you really want to build something significant. Remember self-care, but don’t go out expecting you’ll build anything important if you plan to work the same amount as every body else.

Be honest: Nobody improves without feedback, and I try to give as honest feedback whenever I can. This is not the same as being mean. You can almost always be both honest and positive. I try to be.

Teach fishing: As in, don’t give a man a fish. Be patient and try to explore underlying dynamics rather than jumping straight to the conclusion. I believe in this, but still often struggle to put it into practice.

Strong opinions held weakly: When the facts change I change my opinion, but before that I try to take clear positions on issues. I find it’s the best way to learn and explore any topic - as long as others involved know that. This one I’ve taken from Bezos, same with the two next ones.

Go with 70% of the information: As long as you are directionally correct you learn more by action. And most decisions are reversible, so no need to slow down to increase accuracy.

Regret minimization framework: When facing multiple options, try to reflect on which alternative you’ll regret the most not choosing. And go with that one.

Do one thing: Focus. Nothing clears the mind like the absence of an alternative.

I look forward to revisiting this one further ahead.

Selecting Beachhead Market

So, this is a post I’ve been meaning to write for a while: selecting beachhead market. Very often when I discuss this topic with entrepreneurs, the discussions are unnecessarily blurry and unstructured. They don’t have to be, and this is what I would do to avoid it:

Before I jump into the details, note that this framework is more useful for entrepreneurs with a “solution looking for a problem” than the opposite . What I find is entrepreneurs most often are somewhere on a spectrum between these two extremes, so my thinking is this should be helpful for many early-stage founders.

As a founder, you have to figure out “who to approach first?”. You have a total addressable market, and it can be sliced and diced (aka segmented) into many pieces. Figuring out which piece to approach first is not always trivial.

While not always intuitive, I strongly believe it’s better to pursue one segment 100% rather than multiple in parallel. This does not mean picking the first one you find, but rather to quickly review the possible segments and quickly decide on one.

Now let’s say you have different segments where your product might be useful, how can you decide on one segment more quickly? The decision should be made with incomplete data (otherwise your decision making is too slow), but I believe you could aid your decision making process by mapping out your market segments. Here’s a walkthrough of how I would do it:

  1. Figure out which market segments you theoretically could approach first - and put them on a list.
  2. Figure out which criteria you should use to evaluate the markets. This might vary, but if I were making the assessment I would include the following:

    • Decision speed: How quickly are you able to go from initiating contact to a purchasing agreement. Quicker is obviously better. One of the most important things in my opinion, and the reason why I rarely recommend going after entreprise-sized clients while you’re a young company - they’ll choke you.
    • Market size: How many customers are there? How much is each customer willing to spend on your product.
    • Competition: How many alternatives does your customers have?
    • Product differentiation: How significantly is your customers’ pain reduced if they switch to the current version of your product.
    • Founder-market fit: To what degree are you able to approach this market? Do you have preexisting network, understanding, experience in approaching it. Are you motivated to approach it?
  3. Rate how important you believe each criteria is. Base level is 1, and if you believe one criteria is twice as important you rate it 2 etc. I don’t have a blueprint on how this should look, but I would probably weight them like this:

    • Decision speed: 2
    • Market size: 1
    • Competition: 1
    • Product differentiation: 1
    • Founder-market fit: 2
  4. Assess the critera for each market segment on a scale of 1-3.

Some would probably argue you should reach out to your potential segments and do some research first, but I think it’s sufficient to take your best guess. I haven’t seen anyone build real confidence around a segment through a short research period - getting to know a market takes a long time. The point is getting to the segment you should thoroughly research more quickly.

Either way, you’ll end up with a table looking something like this:

Market segment assessment

What you now have, is your best guess at what is the most attractive beachhead market segment. But as you are inputting every variable, you already understand you can make this look any way you want.

In other words, what you really have is a better overview of what to take into account when deciding on which segment to focus on. If one segment scores really low, it could mean either that you shouldn’t focus on that market - or that you’ve weighted and assessed the segment poorly. You have to be the judge of which one it is.

The purpose of this framework is not to make the decision for you. Rather, it should make it easier to discuss your alternatives, and thus decide more quickly on which one market to target. And once you have have decided - don’t second guess it all the time, commit to that plan until you succeed or you have clear evidence you should do something else. To end with a Henry Kissinger quote;

“The absence of alternatives clears the mind marvelously.”

Side note: once you decide on one segment, I find this framework to be really good to bring into customer meetings. Eg; if you chose the market because you believed their decision speed was really high, make sure you actively pay attention to this as you talk to your customers. Is that hypothesis strenghtened or weakened as you go on? Should you double down on, or reconsider market segment?

Side note 2: if you’re looking for more on this topic, I highly recommend this article on how SuperHuman built an engine to find product-market fit. An extremely structured approach to the problem, and afaik the results have been remarkable so far.

New funds

So, yesterday we announced something we’ve been working on for a longer period of time:

Obviously, we believe this is very good news. Our mission is to help early-stage founders build great tech companies out of Norway, and capital is a very important part of this work.

It is both humbling and motivating that so many experienced company builders trust us with their capital, name and time. The search for the next 50 companies we’ll fund has already started, and if you believe you might be the founder of one of these companies I encourage you to check out our upcoming accelerator program - application deadline February 1st.

You can also check out the story in Shifter/E24 here.

Deadlines

Deadlines are very effective. They force me to do stuff I otherwise would have postponed.

At the same time, they sometime blind me, causing me to shift focus from “not urgent but important” tasks to “urgent but not important” tasks. A trap worth keeping an eye out for.

That is not the case today. Tomorrow we’re announcing a bunch of stuff at StartupLab, and I’m busy finalizing a lot of work in relation to this. Meaning I don’t have time to put out something very thoughtful today.

Still posting this as part of my routine to post something every Wednesday. If nothing else, writing these few lines help establish this much wanted routine.

Now - back to work. Check out my twitter feed tomorrow where I’ll be sharing the news we announce.

See you next Wednesday (if not before)!

Alternative cost

As a founder planning to raise first money, your plan should be to build the most compelling story around your company and the opportunity it represents. Common knowledge and logic says the market you’re going after should have an appealing size, and your job is to communicate this properly to your potential investors.

Next step is explaining how you plan to take a significant part of said market, usually referred to as the go-to-market strategy. This is where it sometimes gets tricky. The difficult thing is being able to take your big market, break it down, and explain how you will attack it. The wrong answer to this question is “we’ll tackle the whole market at once”.

Your market consist of different segments; firm sizes, geographies and so on. While your long-term plan might be to conquer all these segments, it’s usually not a good idea to attack them in parallel. You might think they all want your product - and that could even be true. But in the early stage*, there will always be one market segment with the highest yield, or bang for the buck if you prefer that term. You might not know which one it is, and it might change - but it’s there.

I believe it’s totally fine to say “we don’t know which market segment is the best yet”, as long as that implies that you’ll test your alternatives and then commit to one segment next**.

On the contrary, I don’t believe it’s a good idea to deliberately pursue multiple segments in parallel. Assuming you have one segment with superior yield, your plan should be to allocate all resources to this segment. All funds and hours you throw after other segments have an obvious alternative cost - it could be put to better use.

If you’re pitching a plan to attack multiple segments at once, you’re basically communicating that you won’t spend the capital you’re looking to raise in the most efficient way. And that’s not something you want your potential investors to think.

*As your company scales, obviously it makes sense to go after multiple segments simultaneously.

**See my post on Hesitation cost.

Frequently shared links

I’ve probably read thousands of startup-related articles over the years: many bad, many good, and some excellent enough that I continously share them with founders whenever they need help on a certain topic (no need reinventing the wheel and so on).

I’ve saved all these articles in a google doc, but I figured it’s of more use if it’s publicly available - and updated as I find new gems worthy of being added. So here it is, my startup content database:

General advise before fundraising

Notes on raising seed financing from C. Dixon of A16Z

Paul Graham on almost everything you need to know about early-stage fundraising

Mark Susters super extensive guide to fundraising

VC Signaling, by me

Process and leverage in fundraising, by Aaron Harris of YC

The intro and pitch deck

How to write emails to early-stage investors by Michael Seibel, YC

How a pitch deck should be, 10 slides from Bessemer Partners

How a pitch deck should be, 10 slides from Sequoia

How to ask for introductions via email, by Mark Suster of Upfront Ventures

The two basic concepts of introductions, by me

Templates

SaaS Financial Plan, by Christopher Janz of P9 Capital

SaaS dashboard, by Christopher Janz of P9 Capital

Product market fit

How SuperHuman Built an Engine to Find Product Market Fit, by First Round Capital

WTF is PMF?, by Christopher Janz of P9 Capital

Sales

Sales advice for technical founders, by YC

Hiring

Talent playbook by RRE ventures

Reference calls done right, by Cowboy ventures

Startup compensation, by Homebrew ventures

Organization

How to make OKR work at your organization, by Fist Roundt Capital

Will continue to update this post. Last updated January 9th.

Seven predictions for Norwegian tech 2019

Feeling inspired by lots of others posting their predictions for the year to come, I wanted to stick my neck out with a few predictions about what we’ll see in Norwegian tech/startups in the coming year. Obviously, these are just predictions, and I look forward to revisiting this post in a year to check my accuracy. Here you go:

High profile startups will die: At least two startups having raised +$10M will have to close the shop or sell at unfavorable terms. I don’t have any specific companies in mind, but it seems unlikely (from a statistical perspective) that all companies will be able to continue growing successfully. “Rockstar” companies will die, and this will be both surprising and disciplining for the local ecosystem.

Few foreign investments: Exceptions will apply, but not many companies will raise big $ from abroad. Not because local founders aren’t investment-worthy, rather because there’s still a communication gap - founders still need to learn how and who to approach when with what. International investors will continue to visit more frequently though, as the opportunity is obvious - same demography as rest of Nordics but much less crowded.

More corporate venture: 2018 was a year where Norwegian corporates really started to invest in startups, and I expect this growth to continue through 2019. One could argue more money is good, or that money with potentially conflicting interests is not good. Or both. It’s probably somewhere in between. And it’ll be more of it in 2019.

Still out of sync: The correction we’re seeing in the US tech sector will not affect Norwegian startups - investments will continue to grow (both # and total amount), both because of new domestic funds launched in 2018, and because Norwegian tech will continue to be partly out of sync/lag relative to rest of world.

Climate change: Following the launch of Nysnø, an increasing desire to move away from the oil economy (especially in big cities, where most startup investments are made), and an growing awareness around this issue globally - 2019 will be the year where Norway seriously becomes a place for climate positive startups. There’s just to many skilled engineers with energy-related competency for this not to happen.

Norway as an attractive market: Amazon will launch this year (I believe), and we’ll see more international players go after the Norwegian markets within (micro) mobility, banking (Revolut’s already here), marketplaces and more. Consumers will win, local startups (and corporates) will struggle - some will win, some will die, some will be consolidated.

No new option rules: Everyone will continue to ask for more fair laws regarding employee stock options, but nothing significant will happen this year either. It’s the most obvious change politicians can make (one that will benefit everyone). Still, they haven’t figured it out yet - despite appeals from just about everyone within the industry - so I don’t think they’ll figure it out this year either.

Bring it on - 2019! :) If you want to follow the action live through the year, make sure you “subscribe to my biweekly newsletter.” Also, I’d love to hear your comments on Twitter

Decisions

I’m reading “Thinking in bets” these days. Halfway through it it’s a great read.

The best expression I’ve taken from the book is “Resulting”, as in focusing on the results not the decision that lead to the result.

An example to explain: You know there’s 90% probability of rain, so you bring an umbrella. It doesn’t start to rain, and you feel bad about your decision. The decision was correct, but you’re resulting.

These things are all around. Another version of this is survivor bias - excellently illustrated in this xckd (my favorite one actually - I’ve had this printed above my desk for the past few years). Tom Tunguz also writes brilliantly about this.

We all suffer from this to different degrees. But I believe we’ll all make better decisions just by being aware of it. So go read the book.

Repeatability

I’m a big fan of Steve Blank’s definition of what a startup is;

…an organization formed to search for a repeatable and scalable business model.

One thing I find myself talking a lot about lately is the “repeatable” part of the definition, and how important it is. While most founders understand that it’s important to get customers, fewer fully understand the value of multiple customers.

Having multiple customers show that you have figured out how to repeat your sales process. One time is chance, two is coincidence, third time is some proof of repeatability. And it’s proof that you understand what you are doing, and that you can do it again.

Thus, I would much rather invest in a company with 10 customers, each paying $1k, than 1 customer paying $20k (everything else equal). The former is a company that’s learned to repeat something, the latter has not.

This is also why it’s not always a good idea to start up by selling to large corporates (unless you have done such sales successfully before). The sales cycle is longer, meaning you are less likely to prove repeatability before you run out of cash.

Distribution

One thing I discuss with all startups is distribution. I use the term distribution to describe sales and marketing activities – everything related to getting customers. Unfortunately, most companies both suck at it and underestimate how important it is.

Many seem to think that “build it and they will come” is true. Others seem to think it’s a small detail that can be attended to in no time once the product is finished.

Truth is, distribution is really really hard. And it takes a long time to get right. I find that most respect that building (aka tech) is a craft/skill. The same can’t be said for distribution aka sales, even though it’s equally hard if not harder.

You can fix most product problems on your own just by spending enough time. But distribution requires external parties’ consent. It takes practice and time to get it right. 

If you don’t start doing it early chances are you don’t have enough time to get it right. And then your company dies instead.