I'm a partner at Redpoint. I write daily, data-driven blog posts about key questions facing startups. I co-authored the book, Winning with Data. Join more than 20,000 others receiving these blog posts by email.

The one ideal characteristic of your startup’s first customers

Over lunch last week, a good friend who is an entrepreneur and I were brainstorming about the features of his optimal initial target market. His product hasn’t yet launched so he still had some decisions to make about which users and use cases to target. We wondered if there were a rule of thumb about initial target customer segments.

We took out a blank sheet of paper and came up with this:

Ideal Customer = max (DAU / MAU)

Rapid iteration from informed feedback

The best first customers are ...


Willing to be misunderstood

Jeff Bezos appeared on Charlie rose two weeks ago and spoke about Amazon’s history, future and best of all, its culture.

In the interview, Bezos discussed Amazon’s core values:

  1. We are willing to be misunderstood
  2. We are obsessed with customers, not competitors.
  3. We are long term thinkers

While all of them are critical to Amazon’s success, my favorite is the first because it combines three critical concepts for startups.

First, it requires knowing a secret, in the Peter Thiel sense of the word, ...


The dumbest guy in the room

I rowed crew in college. I walked on to the team and fell in love with the sport the very first time we pushed the boat from the dock and took a stroke. Looking back on those four years, I often draw parallels between rowing and entrepreneurship.

My freshman year, Joe Holland, who had raced for the national team in the eighties had taken a sabbatical to coach the freshmen team. He was a master and he loved the philosophy of rowing as much as the sport.


Education sales vs execution sales

When going to market, startups tend to pursue one of two sales strategies, either education sales or execution sales.These sales strategies are substantially different. They demand different sales cycles, pricing and market positioning - potentially even different team members.

The Education Sale

If your customers don’t know they need your product yet, then the sales process is an education sale. Education sales are common when creating a new market (TiVo inventing the DVR) or when bringing existing technologies to new market segments (CRM for restaurants).

Education sales demand great ...


Startup playbook: reverse-engineering Clay Christens’s market disruptions

In this month’s HBR, Clay Christensen and Maxwell Wessell published an article targeted to the CEOs of large companies on how to prevent disruption to their businesses.

They point to five major barriers to competition in a market listed in increasing order of difficulty to assail. Instead of reviewing the incumbent’s strategy, I’m going to flip these around to reverse engineer these defenses and build a startup’s playbook for disruption with examples from our portfolio.


  1. The inertia barrier: When entering a market, a ...


Data on the “seedpocalypse”

Call it what you like. The Series A Crunch or Silicon Valley’s Financial Cliff, there’s a lot of talk about the challenge seed stage companies facing insurmountable odds raising Series A investment - PandoDaily’s analysis pegs the odds at 20% based on anecdotal data.

The three horsemen of the seedpocalypse

In the past 3 years, the three major trends influencing the seed market are:

  1. The decreasing cost of starting a company is balanced by growing labor costs. Seed companies must still raise Series As to scale.
  2. ...


VC consumer investment trends by sector and stage

Yesterday, I showed the increasing share of venture capital investments consumer companies represent. But examining the trends at a category level may mask patterns by consumer category and also by stage.

So, I’ve created two charts: the first is a bar chart of consumer investment by segment and the second is a heatmap of of sector and stage. I categorized the consumer investments by 10 leading firms over the past 18 months into six buckets of my choosing.

Consumer services and ecommerce represent 70% dollars invested


The cognitive burden of unbundling

Department stores. Computer software. And even education. Products and services are being broken into their atomic units and optimized for price, selection, features and, most importantly, customer satisfaction. This is an inexorable trend that cannot and should not be stopped.

Roger Ehrenberg in a post called “The Great Unbundling”

This unbundling is happening. But I’m not convinced it’s every consumer’s desire to consume media or purchase clothing a la carte. Or that this is the end state of commerce. Instead, the future is a ...


VC investment trends in the consumer web

Fred Wilson’s perspectives on trends in consumer web investment created a big brouhaha over the weekend. Commenting on a WSJ article, Wilson offered his confirmatory observations that follow-on investments in the consumer web have become more challenging as momentum investors have shifted toward enterprise.

Over the past 18 months, valuations of later stage consumer internet companies have ballooned into the hundreds of millions propelled by enormous user growth. For many of these startups, revenue hasn’t been able to keep pace with rising serving costs. It’s not surprising ...


A Startup’s Two Financial Plans: the Board Plan and the Stretch Plan

Last week I wrote about the importance of a financial plan for startups at every stage. It’s a challenge to balance the predictability the board requests and the ambition the company wants.

Often, as startups grow, they adopt two plans: a board plan and a company plan. By creating two plans and presenting each to the right audience, founders can communicate and motivate their teams effectively.

The board plan is the more conservative of the two. Typically, the founding/management team has a high degree ...