In June 2023, the world held its breath.

From every news source, we were learning about a deep sea exploration mission that had gone awry. A submersible, called the Titan, was undertaking a dive to see the Titanic wreckage some 12,500 feet under the surface of the ocean. In its descent, contact with the sub was lost. For days, the world held its breath as we were wondering what had happened to it. Unfortunately, it was announced several days later that the Titan had had a catastrophic implosion, killing all five people on board including Stockton Rush, the CEO of the company, OceanGate that was behind the exploration mission.

Recently, I stumbled onto an interview with James Cameron on the failure of the Titan submersible. James Cameron is a deep sea explorer who had visited the Titanic wreckage over 30 times in his career. He later went on to direct the Titanic movie that featured Leonardo DiCaprio.

As I was listening to this interview, I recalled that in June 2023 when the Titan submersible story was unfolding, it gave this impression that deep-sea explorations were extremely dangerous.

But as I listened to the interview with James Cameron, he said something that I found interesting. Cameron said that this is an anomaly. We all understand how to be safe on these dives. Then, speaking of OceanGate, the company behind the Titan, Cameron commented, "These guys broke the rules."

James Cameron said that Stockton Rush and his OceanGate team used a carbon fiber hull for the Titan submersible. Stockton Rush came from the aerospace industry, of which carbon fiber is prevalent in its use with airplanes, and applied that to the submersible industry. Cameron says that carbon fiber is strong, but carbon fiber works well for pulling forces where you want lightweight materials stretched under tension, such as airplane wings or bike frames.

However, in thousands of feet underwater, you don't want to optimize for not pulling forces. You want to optimize for compression forces. It's not that carbon fiber is a poor material. It's not. It's carbon fiber was used in the wrong application and market.

It’s Not About Insiders vs. Outsiders

Now, parlayed to startups and venture capital, I found several things interesting about James Cameron’s comments.

As Stockton Rush came from aerospace and applied his knowledge into submersibles, it's easy to make this a conversation about whether being an insider in an industry is better than being an outsider to an industry.

But in my investor experience, I believe that insiders vs. outsiders is far too simplistic of an approach and it's very hard to assign causation to this fact alone.

In some startup markets, bringing a winning insight, product, or business model, etc. from one industry and applying it to another is a smart strategy. But in other markets, that same strategy doesn’t work. Sometimes, in fact, it is an epic fail.

My question is, is there a way to understand with greater clarity which markets fall into which category?

I’ll try to frame that up.

Knowing the Market Constraints Ahead of Time or Not

I would propose a few truths that help founders understand that the conversation is not about who the founder is, an insider or outsider, but rather, what type of market it is.

It has to do with whether or not it is important to know the market constraints ahead of time, before a startup undertakes a endeavor in that space.

I’ve seen a few truths as it relates to startups and their markets:

1. In some markets, knowing the market constraints ahead of time is much more critical to winning.

2. In other markets, knowing the constraints ahead of time doesn’t matter as much.

Regardless of the market type and the constraints, in every market, founders need to understand where the bodies are buried and why the living live.

Living Constraints vs. Gleaning Constraints

In the markets where knowing the market constraints ahead of time is much more critical to winning, the constraints have to be previously-lived.

In the markets where knowing the market constraints ahead of time doesn’t matter as much, the constraints could be gleaned.

A Market Where Knowing the Constraints Ahead of Time is Critical

Formally, I co-founded a FinTech startup in the bond market.

What I didn't know at the time, that I can see with clear objectivity now upon writing this article, is that the bond market was a market where knowing the market constraints ahead of time is critical to winning. And those market constraints in the bond market had so much depth that it could not be gleaned. It had to be previously lived - experience, that we did not possess.

For context, I came into the bond market space via my father, who had been selling municipal bond portfolio management software to the largest banks and asset managers. I came into founding the company off of JP Morgan through my MBA. But I did not come the trading desk but rather the retail side.

I realized that not coming from the bond trading space, I had an inherent limitations in understanding the constraints of the problem. In the case of my father, he sold bond market software, but he wasn't a trader. He didn't think like a trader.

But, initially I was unfazed by this. In typical lean startup fashion, I set out to learn as much as I could and experiment. My only window to learn about this problem use case was through the conversations with professional bond traders.

I took solace in what I heard preached from Silicon Valley - that sometimes the best ideas come from outsiders. Our advantage, so I reasoned with myself, was that we were a team that didn't come from the trading desk that were building a bond portfolio decision product. So, I reasoned logically, as all of the other bond trading startup CEOs were former bond tradings, we could think in ways that other bond trading startups could not.

But as I got into the market more and more, it became an onion with layers upon layers. But unfortunately, I only ever had a fractured understanding of the constraints of the problem use case, such as how a bond trader intuitively determines which bonds are selling at a premium and which ones are on sale, how the trading technology systems work and the features and the limitations of that technology. I had never lived the interaction and experienced the true value of other bond market actors, brokers, etc.

Me and my father’s lack of previously lived experience had massive negative implications on how we built a product for that market.

I wish someone would have told me this when I founded my company 9 years ago. "Matthew, bond trading is a market where previously living the market constraints and nuances is totally necessary. It is impossible to glean the full context of the market constraints in a short amount of time."

There are some markets where knowing the market constraints ahead of time is critical to winning. In those cases, the constraints have to be previously-lived.

A Market Where Knowing the Constraints Ahead of Time is Doesn’t Matter as Much

Then, there are some where knowing the constraints ahead of time doesn’t matter as much. In this case, the constraints can be gleaned.

Octane Coffee is one such example.

One of the Tundra Angels’ portfolio companies is Octane Coffee, a robotic automated coffee and drink drive-thru. It’s an amazing technology that customers get on the Octane Coffee app and place a drink order. The GPS tracks the location on the way to the kiosk and perfectly times the drink making so that when the customer arrives and scans the QR code, the cabinet rotates and the drink is ready to grab and go.

Tundra Angels invested in Octane Coffee in in February 2021 from the initial prototype robotic configuration. Fast forward, their kiosk is live in Pewaukee, Wisconsin and they are launching locations 2 and 3 this Fall and then plan to franchise after that.

Adrian didn't come from the drive-thru industry. He didn't come fast food. He came from Ford, Chrysler, and Harley-Davidson and was a robotic automation engineering expert.

But it just so happens that the drive-thru coffee market is such a market where knowing the market constraints ahead of time doesn't matter as much. So understanding the workflow and drive-thru experience could be gleaned.

As Adrian set his mind to gleaning the constraints of the drive-thru experience, he fundamentally saw an engineering problem and a workflow problem. And that, I would argue, is actually how the drive-thru coffee industry needed to think about it to move into the future that Octane Coffee is creating.

Knowing the market constraints ahead of time matters much more significantly in some markets than in other markets.

In those markets where knowing the market constraints ahead of time is critical to winning, the constraints have to be previously-lived.

In those markets where knowing the market constraints ahead of time doesn't matter as much, the constraints can be gleaned.

Where The Bodies are Buried and Why the Living Live

In any market, it is a founders' own responsibility to know where the bodies are buried and why the living lives. 

What do I mean here?

I am referring to startups that have attempted the same thing as you are undertaking. Or, companies that have tried certain go-to-market strategies that are akin to what you are trying to do.

Knowing where the bodies are buried and why the living live help founders see which market constraints are important to optimize for, and which market constraints can be disregarded.

Where the Bodies are Buried in MusicTech

Another Tundra Angels portfolio company, EVEN, is a MusicTech platform that is taking the music industry by storm. Streaming platforms are predicated on needing a high volume of fans for artists to make a livable wage. EVEN makes it possible for artists to get paid what they are worth without needing a global following.

EVEN is a platform for artists to build community and pre-release their music 14 days out, 30 days out, etc ahead of going onto streaming platforms. Followers can buy their music and get exclusive access to content that they only put out on EVEN. We invested in EVEN in August 2024.

In our due diligence process, Mag talked about how he had been a manager for several big name music artists that had over 1 billion streams in aggregate. He later worked for gener8tor, a venture capital firm and startup accelerator network, and built out gener8tor’s music technology platform. Mag was a music industry insider, turned venture capitalist, turned startup founder.

But what set Mag apart was that he clearly knew in music industry technology where the bodies were buried and why the living live.

In one instance during due diligence, I asked him about a particular MusicTech startup that had raised several million dollars. I didn’t fully understand all of the intricacies of the platform. But then, the company shut its doors, seemingly out of the blue. It was totally unexpected to me and to those following their journey.

The reason why this company failed was something that I had never gotten full clarity on. So when I chatted with Mag, I asked him about this particular company. Mag said, simply, The team didn’t come from the music industry, so the industry didn’t fully embrace them.”

Whoa.

Another example was when we asked him about other MusicTech startups in the space and how they compare to EVEN.

If asked this, many founders would logically answer on a feature level and sound like this, "Our platform does this and that and those other platforms do not."

But I’m going to share Mag’s answer below.

Notice how Mag's answer goes down to level of insight, one might say, six feet under. It shows that he knows where the bodies are buried and why the living live in MusicTech

In our due diligence, we posted the question, "We’ve discovered other venture-backed apps such as Company A, Company B, and Company C. How do you view these other platforms compared to EVEN?"

Hearing to Mag talk like this, it felt like we were being let in on a layer of intelligence of the the music industry and music technology that no one could see or had access to.

That's what I am talking about when I say why it’s important for founders to know where the bodies are buried and why the living live in their respective market.

Closing Thoughts

Back to the Titan.

What type of market is Deep sea exploration and submersibles?

Arguably, it is a market where understanding the market constraints ahead of time might not matter as much, so the constraints could be gleaned.

You might be surprised to hear me say that. There are lives at stake man, there is way more at stake than the bond market! But its not about what’s at stake. It's whether or not knowing the market constraints ahead of time needs to be previously lived, or if the market constraints can be gleaned.

In that way, the constraints around how a deep sea sub should be built is not something that needs lived experience to understand. James Cameron and others in the deep sea submergence community repeatedly made these constraints clear to Stockton Rush - “We don't use carbon fiber for the hull and here is why, we don't do this, we do that.”

OceanGate's failure is that they didn't glean those constraints.

So let me ask you - are you in a market where knowing the market constraints ahead of time is critical to winning? In that case, the constraints have to be previously-lived and so your startup team should reflect that.

Or, are you in a market where knowing the market constraints ahead of time doesn’t matter as much? In that case, the constraints can be gleaned.

But regardless of the market, founders also need to know where the bodies are buried and why the living live.

Fundamentally, knowing where the bodies are buried and why the living live help founders see which market constraints are important to optimize for, and which market constraints can be disregarded.

If you don't, then your startup might just be the next body that is buried - either or in the graveyard of the market… or 12,000 feet below sea level.