20VC Newsletter - July 14th 2024
Here are the transcripts and top takeaways from 20VC episodes released this last week!
Monday’s episode with Pat Grady, Partner at Sequoia:
Download the full transcript:
My 9 key takeaways:
The Sequoia Investment Process and the Mistake Everyone Makes
It’s as simple as crystalizing the thesis then stress-testing it to make sure it’s real.
Common mistake is people launch into diligence before they figure out what they want.
Your thesis doesn’t have to be complicated - it just has to be crystal clear.
You Will Never See Anyone at Sequoia Fired for a Bad Investment
You will never see anyone at Sequoia applauded for a good investment.
We’re in the risk taking business & one data point doesn’t make a trend.
We look at the activities & behaviors because the feedback cycle is long.
Why the Founder Is More Important Than the Market
The market determines how big a company can get.
The founder determines how big the company will get.
I will take a modest market with a spectacular founder over a gigantic market with a mediocre founder any day.
Framework for Analyzing Founders
Two ways:
I assess the founder-market fit & the vectors describing them.
Founder-market fit: You need to have a problem & solution variable accounted for.
Vector: Consistent track record & motivation; building a startup is hard AF.
The $BN Revolut Mistake
Peter @ Segment.io and Nikolay @ Revolut both pitched their story within ten minutes
The ideas were so simple & I didn’t have any further questions for them.
We ended up passing on both.
We Lost $29BN of ServiceNow by Selling too Soon
We distributed it a year after their IPO.
It was the first $1BN gain we had in the growth business.
If we held onto it, the gain would have been $30BN.
Do Sequoia Get Pricing Power?
Most companies pay more for our “premium product” in Seed/Series A.
The difference between starting a company with and without Sequoia can be pretty big.
We don’t get massive discounts at a later stage because companies are more established.
Is VC a Young Person's Game
Senior investors have experience which compounds over time.
BUT we’re in the details business & younger investors are more detail-oriented.
We look for mid-career investors who have a bit of both.
What is the Pre Mortem for Sequoia
It won’t be the markets or platform shifts, but from losing our sense of desperation.
We need to stay hungry & humble.
If we don’t go out there and earn it, tomorrow we are irrelevant.
Wednesday’s episode with Ara Mahdessian, CEO at ServiceTitan:
Download full transcript here:
My 8 key takeaways:
How a Meeting at SaaStr Led to Multi-Million Investment
We spoke with Byron Deeter before but I was hesitant to take institutional capital.
A friend told me Byron is the one person I HAVE to partner with & he is the best early stage B2B SaaS investor.
I texted Byron immediately after & the partnership began.
The Company That Would Not Have Worked if it Has Raised More Money Earlier
If we raised $5M on $25M like many in the valley do today, ServiceTitan would not have worked.
It is so crucial to be so close to your customer in the early days. Our lack of funding meant we had to do every function as founders.
Three Core Tips to Scaling Upmarket
3 Things:
You need a maniac on a mission leading the charge.
There are new customer needs that need to be discovered & solved for really well & quickly.
All business buying decisions are all about ROI
Everything we do on building product is about driving the ROI.
Why the Founders Has to Be a Product Builder and the Benefits of It
Vahe and I are both engineers & we knew how long everything takes to get built.
You can calculate which problem & solutions to prioritize quickly.
We also hired better since we knew the domain.
How to Build a Premium Brand?
You can’t be a clothing brand putting shiny logos on cheap materials.
Our goal is to make ServiceTitan a no-brainer purchase through unconscionable amounts of ROI.
When the ROI makes a life-changing difference to a business, you earn the premium label.
Two Reasons Why Customer Success is Crucial
Two things:
This business is very personal to me & I will do anything to make sure these businesses are successful.
The financial rewards are insanely high.
This is why we get so many inbound leads & our closing rate is so high.
If You Wait for Perfect PMF on Your First Product, Your Second Product Will Be Too Late
You cannot wait for perfect GTM & implementation before starting your second product.
Start building your second product early & invest more as it gains traction.
Real PMF is understanding the purchasing process & ROI case, but it doesn’t have to be perfect.
What is Great Leadership?
It’s about generating great outcomes.
These outcomes come from one or two big decisions.
Successfully executing them involves hundreds of mini-decisions.
Friday’s episode with Mark Roberge, Co-Founder at Stage 2 Capital & former Chief Revenue Officer at HubSpot.
Download the full transcript here:
My 6 key takeaways:
We Turned Down FB As a Customer Who Would Have Doubled Revenue
A rep brought in Facebook on a $3M contract when we were $3M in revenue at HubSpot.
We were being pulled & had to say no.
They would have controlled our product roadmap & it won’t end well.
Don't Scale into Enterprise Too Early
Chasing that logo will take too long & kill you from a capital standpoint.
The right time to do it is when you get pulled.
Big businesses should be hearing about you when you’re doing $6-7M from SMBs.
The Color System for Selecting ICP
I group them into 3 categories.
🟢 Green: Strong conviction & good fit.
🟡 Yellow: Not enough conviction, inbounds only.
🔴 Red: Strong conviction to not sell.
These profiles will change as you build conviction on customer success & performance.
Sales Rep Hiring: Why Deal Size is More Important Than Domain?
The skill sets needed for a $1M deal is much more unique.
Identifying champions, buyers, legals, procurement…
It is so much easier to train someone with that experience in a new industry.
Why I Look for Coachability in My Sales Hires
No one starts off hitting their productivity goals in month 1.
They need to learn the product, the methodology, the customer…
I observe these through role play feedback & self assessments.
Biggest Mistake Startups Make With Partnerships
Founders do partnerships because they don’t want to hire a sales team.
Getting into Workday’s partner program is extremely hard & getting the rep’s mindshare is even harder.
You need to understand the C-level strategy & align your product with that.
Let us know what your big takeaways from this week’s shows were in the comments below!
Thank you for reading, and don’t miss the great guests we have next week:
Sam Motamedi, Partner @ Greylock
Pedro Franceschi, Founder & CEO @ Brex
Mehdi Ghissassi, Director & Head of Product @ Deepmind
Thank you for reading 20VC.
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