The Most Important Things Startups Need in Order to Win 😮

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 ✅

In this newsletter, let’s unpack “non-obvious insight.” This is one of my favorite topics to unearth when evaluating startups. 

Let me ask a question - how do startups win? The answer is not getting product-market fit. Product-market fit is a result of something upstream which I will explain. Let’s go back to first principles for a second. 

It starts with seeing. 

Specifically, it starts with seeing, listening, hearing, observing data points from the market that leads to a different strategic angle of attack. I name this the “non-obvious insight.” 

✅ The “non-obvious insight” simply put, is an insight, a belief, a point of view that is the strategic foundation of the startups’ execution. The non-obvious insight is not widely distributed. In fact, it’s almost a secret believed by only the startup founder and perhaps early believers. It’s oftentimes a contrarian or even a provocative view. It is like a secret that is hidden in plain sight. When I encounter strong non-obvious insights in startups that we talk with and invest in, my reaction is almost uniformly, “Oh my gosh… you’re so right. I’ve never thought of it that way before.” 

Non-obvious insights form the underlying strategy of the startup’s angle of attack. ✅

Importantly, a non-obvious insight is context-dependent. Specifically, a non-obvious insight is tied to the context of a market, a customer segment, or a technology development. 

I also want to underscore one point - a non-obvious insight is not a feeling, such as “I feel the market is ripe for this because of _______ .” Rather, it’s a conviction. 

✅ Non-obvious insights are communicated to me in three different ways: 

1. “We have seen that __unique insight into the market (typically anecdotally picked up from a large sample size from an array of customers, or from proprietary intelligence)____ and so therefore, we are doing________________ .”

2. “We believe that __(POV about the way a market will evolve)____because ___(listing of the several hidden undercurrents in the market that give credence to the POV).  So, we are doing ____________.”

3. “We know that ___(strategic decisions and tactics that the current incumbents are executing)__  and that is sub-optimal because __(specific examples, not hypotheses). Thus, we are taking a different approach which is _________________.” ✅