In the last newsletter, I put forth the “Venture Investing Expression” below:

✅ Depth of market problem ∝ solution fit ∝ non-obvious insight ∝ traction ∝ business model ∝ market size ∝ go-to-market strategy ∝ team execution potential ∝ status of fundraise ∝ valuation ∝ stage of business ✅

The Go-To-Market strategy is next up. Another way to think about GTM Strategy is “product distribution.”

There is this ridiculous myth that I need to immediately dispel - “Build it and they will come.” (If only Kevin Costner from the Field of Dreams movie knew how unwise and unhelpful that memorable line would be, especially for startup founders!) “Build it and they will come” is THE biggest myth of tech startups. 

Here is a critical observation: 

✅ For any startup, the Go-To-Market strategy is one of the most crucial elements to get right in order for the startup to win. 

Yet, I would venture to say that the Go-To-Market strategy that typically is the most underdeveloped and weakest part of a given startup. ✅

To be blunt, I think the majority of founders approach startups with the mindset that “the best product wins.” I think this belief is due to the fact that you and I are end users of countless apps, countless software packages. We use a given product continually. But our awareness of the product happens only once. Either someone told us about it, or we learned about it by Googling something, but there was a single moment that the product was distributed to us and/or we became aware of the product. 

Thus, over time, we forget about how we heard about the product (the essence of the GTM strategy) and then spend all of our energy on the app and how it works for us. It’s no wonder that the majority of startup founders approach startups with a scant understanding of the GTM strategy. 

My late father was in enterprise SaaS sales for about 20 years selling to financial institutions. He would continually tell me (paraphrasing), “The company that wins is not the one that has the stronger product. The company that wins is the one that markets and sells the best.” I didn’t understand it fully at the time, but years later, I have observed that to be 100% true. 

More often than not, here is what I often see - a startup might have a potentially viable value proposition that is on its face interesting, except their way of distributing the product is the exact same distribution channels that ALL other alternatives or competitors in the space are doing. 

In order for a startup to win, it has to win across the entire surface area of everything it does. As far as it relates to product distribution, this often means distributing the product in a completely different and novel way to customers that leads to massive adoption. 

Much of my early thinking on product distribution came from Peter Thiel in his book Zero to One. The title of chapter 11 is “If you build it, will they come?” Some of my favorite quotes from this chapter are: 

“If you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business - no matter how good the product.” 

“Superior sales and distribution by itself can create a monopoly, even with no product differentiation.” 

With that backdrop, let’s get into how I evaluate product distribution across different startups. 

✅ In sum, I think about product distribution as very synonymous with word of mouth referrals. The startup that has the most people talking about it in a given market segment will win that segment - hands down. 

Markets don’t operate based on logic and reason. They work based on interpersonal-influence and social pressure. ✅

WIth that said, here are three items that I have observed that are critical to create a word of mouth wildfire: 

Identify a Niche Market

Geoffrey Moore who wrote the book, Crossing the Chasm, has excellent material that is paramount for any startup founder. He defines a market as customers who have 1) a common use case and 2) who talk to each other. 

It's the "...who talk to each" other component that 98% of startup founders never think about. That's how word of mouth energy is built. 

✅ Furthermore, Mike Maples Jr, a VC at Floodgate, insightfully says on his Starting Greatness podcast episode “Nail Your Niche”, “Mastering a niche means, refusing to enter a fair fight. The scales must always be tipped in your favor, or they will be tipped against you. There is no middle ground.” ✅

As an investor, I actively look for startups whose either are A) very clear on the niche market, or B) if the fundraise is happening before landing on the niche market, I spend my time understanding if the founding teams 1) Understand the value of the niche market, and 2) Have the acumen and chops to go identify that niche market and exploit it. 

Identify the actor(s) in the market that hold asymmetric influence over that market network

Market networks are not evenly distributed. You and I have experienced this ourselves many times in life.  

For example, when I was a startup founder, I would connect with potential “advisors” and investors noticed a very interesting pattern - most individuals that were trying to be helpful to me had sub-par connections. For example, I was in the FinTech space selling a bond management decision tool. I would have some people connect me with their buddy who was a “financial advisor in wealth management” - or “this person trades derivatives” - both not close to our actual customer but the closest category to us that the person could think of from their network. Because of this pattern, I had a TON of unhelpful meetings and looking back, wasted my time. 

But then I had one advisor who was completely different. I worked with this person for about two and a half years. Throughout that time, this person was continually bringing up these highly valuable connections exactly in step with what I needed at that moment - strategic investors, customer connections, etc. It was like a magic lamp of powerful network connections that were of always of colossal value. 

I further observed an intriguing corollary. When I would travel across the country to meet with this person and I found myself in a happy hour in the niche market of this community. In conversation with a random person from the community, as we were getting to know each other, I would casually say, “I know [advisor’s name].” And the response never was, “Who is that?, or even “Oh that’s nice.” Interestingly, it was always, “Oh, ________ is amazing!” Or, “_______ is one of my favorite people.” In essence, my advisor had a degree of disproportionate network influence and disproportionate likeability, a rare set of social gifts that the “normal person” in that market network is not bestowed with. 

Looking back on that experience with a different lens, I realize that my advisor had asymmetrical influence over that market network. Because of my advisor, I had meetings with Coastal VCs that I did not have any business talking with and I was assigned a degree of credibility that I didn’t possess myself within that network.

How does this happen?

✅ Again, markets don’t operate based on logic and reason. They work based on interpersonal-influence and social pressure.

It clearly goes to show - get in good with the actor(s) with asymmetric influence in your market network, and the network opens up to you. ✅

And yet, when startup founders approach their niche market, all networks look the same. But, they are not. There are actors that hold asymmetric influence over the market network. Identify those actors. 

Identify the Growth Hack

The growth hack is an asymmetric way of acquiring customers rapidly that leads to a step function in customer growth. 

✅ A growth hack involves getting the startup to the tipping point of the market as quickly as possible. 

The smaller the market, the easier it is to get to the tipping point. ✅

It is a series of tactics that aim to create an inflection point in the market. 

For example, I once heard about a story of Udemy when they were getting started. Udemy is a marketplace of instructors putting out content and students consuming them. 

Udemy was facing the chicken and egg problem. In order for students to come to buy classes, their needed to be classes from instructors on the platform. 

The story goes that Udemy found a way to import classes from YouTube on a range of different topics and populate those on the Udemy platform. It went from very few classes on the platform to thousands of classes in a very short period of time. I truthfully don’t recall how they managed the copyrights and the monetization of that. 😂 Yet, the anecdote communicates that startups that win tend to find and execute in non-obvious ways to accelerate their growth in a very short period of time. 

Growth hacks are largely startup and business model dependent. Sometimes growth hacks are incredibly ingenious and non-obvious. But sometimes it is lying in plain sight in the right market context. 

A Go-To-Market strategy is WAY more than just acquisition channels - should I run ads on Facebook or Twitter? It's also way more than value proposition messaging. That's how average Go-To-Market strategies are created. 

To win, you have to SEE things others do not and EXECUTE differently. The GTM strategy is no different. Specifically, it's about seeing the networks underpinning the markets you are in, finding a niche market where you can be the only, creating the right influence via the market actors, and building an unfair way of acquiring customers via a growth hack. Winning the word of mouth game means that you win the war.