Stealing Signs - Issue 25
Flywheels & Content Communities, The Current State of VC, Niche to Win!, A Carta Story, Playbyte Raises $
Worth Reading
Flywheels and Content Communities
Andy Johns, Unusual Ventures
Every startup wants to storm Paris. But the question is, what is your Normandy? You have to have a precise and almost comically constrained beachhead of early adopters and early content creators.
For us, it was our Silicon Valley connections who wrote excessively about Silicon Valley insider knowledge. What we did with Silicon Valley content on Quora is the software equivalent to what Tesla did when they came to market with their first car, the Roadster. It was intentionally designed for a small, but exceptionally engaged and enthusiastic audience.
This is the best thing I’ve read about online community creation and Andy’s application of the flywheel framework in this context is excellent. One question that kept coming up while reading this piece was “where/how do transactions fit in?” Enter marketplaces.
Marketplaces help two parties, usually supply and demand, discover and engage with each other — similar to user behavior in an online community. Marketplaces also facilitate a transaction between these two parties. In other words, marketplaces, specifically B2C marketplaces, are simply online communities + a transaction. Amazon, Airbnb, and Etsy are good examples — users write reviews, create community content centered around a transaction, and buyers and sellers communicate with one another. These marketplaces did not always resemble online communities, but they quickly adopted features of community flywheels because they are effective in customer acquisition and retention, which help the marketplace flywheel spin faster.
We’re also seeing the reverse transformation — online content communities are beginning to look like marketplaces. The users, or creators, of content communities are increasingly looking for ways to monetize their content, which puts pressure on the communities without this capability. The result is content communities implementing transaction features. For example, YouTube implemented a “tipping” feature in 2017 to allow users to give money to their favorite content creators. Twitch allows users to do the same. These platforms started as communities, but evolved into quasi-marketplaces over time. More recently, we’re seeing startups build marketplace businesses by starting with a content community — drive creators to their platform and optimize for content engagement to build up enough supply and demand for transactions, or a liquid market.
Learnings From Our Community
Lindel Eakman, Foundry Group
Lindel aggregated learnings about how COVID has impacted VC and startups from numerous conversations with the the Foundry Group team and their network of GPs, LPs, and portfolio companies. From what I’ve seen and heard, this is a highly accurate reflection of the current state of the VC market. A few of the best pieces of feedback below:
From convos with their companies:
There is more risk to underreacting than overreacting. In fact, overreacting might be a forcing function for reconsidering and optimizing business model, team operations, etc.
From convos with and about GPs:
Great opportunities will present themselves in this type of market, and at better prices. Many firms will remain active and even ramp up in this market. We should still be “crazy selective” on quality, and this group should keep working together.
From convos with and about LPs:
Understanding where you stand in your LPs’ portfolios is imperative, having multiple points of contact is important, and you should not just assume a re-up from them if you have to raise this year. Do your best to slow down and not hit the market until 2021. There will be a logjam of funds trying to wrap up in the fall, and LPs are way overcommitted.
Niche to Win, Baby
Dave McClure, Founder of 500 Startups
Ultimately, if you *do* want to become a bigger company, you’ll have to grow your market, change your product offering, & compete in multiple customer segments against those big incumbents — but in the first few months of existence, your job is simply to establish a foothold, to get an initial MVP out the door, and SURVIVE.
Dave’s passion for this strategy is palpable. I love it. The “niche to win” strategy is pretty well-established (dependent on industry), but this post is a great reminder of why and how this strategy works. Dave hammers home the notion that a startup need not be the best solution to everything for everyone from the start, but rather a better solution to something for a very specific someone. This approach works because it attracts the right users and retains them — people most affected by a problem come in hopes of finding a solution and they stay because the product is simple and makes their lives better/easier. In other words, it just works for the people who need and want it to work.
COIVD-19 has created tons of new problems for many different people — the “niche to win” strategy only becomes more viable as more people experience more problems. Find one of these problems. Build product differentiation. Find specific people with this problem. And you’re off to the races.
Carta: The End of The Beginning
Sumeet Gajri, Original Capital
It was evident to me early in our conversation that Henry was different - for one he was the first founder of the thousands that I had met to apply the socratic method. We went back and forth until finally we arrived at the ultimate question: “What does the world look like if we win?”. It was obvious Henry had asked this question dozens of times before, yet the tone in which he asked suggested no one had delivered a satisfactory answer yet. Without hesitation I responded “You’ll make illiquid markets liquid.”
Sumeet tells the story of how he went from interested advisor to Carta executive in this excellent post. He covers the story of his first interaction with Carta founder Henry Ward and the year’s worth of emails they exchanged prior to Sumeet joining the company, initially on a temporary basis. Sumeet also includes stories about some of his favorite “Cartans,” or Carta employees, which is a great reflection of Carta’s strong company culture. This post is authentic, candid, and one of my favorite recent reads.
Digging in a bit to the emails between Henry and Sumeet mentioned above, I appreciated Henry’s concise explanation of why he preferred Sumeet join on a full-time basis vs. advisory basis:
There is a lot to do, speed matters, and getting deep in the trenches early on is important.
It’s simple, but it resonated with me I think because it encompasses the best things about a startup in a single sentence.
<stuff> Weekly
LOL Weekly: This Time I’m Different……… lol
lol too real 😭😭😭
Funding Weekly: Playbyte
Playbyte is building an app that will let anyone create and share fun games on desktop, web, and mobile.
Playbyte raised $3.25M from undisclosed investors. I’m intrigued to learn more about this company, especially since their site is pretty bare bones. Playbyte’s model is extremely interesting given the major shift underway in the gaming world — video games as social hangouts instead of story or action driven entertainment. People are beginning to flock to video games to hangout with their friends, watch concerts and exclusive content, and show off designer apparel — behavior that resembles what we’re used to seeing at malls and playgrounds, not the couch in our living room.
It appears Playbyte intends to capitalize on this shift by enabling anyone to be a game developer, which could cement video games as the new social hangout for the masses. Instead of Twitter (jk Twitter ain’t goin anywhere) FB, or Clubhouse, imagine a world where you can easily create a video game to hangout in with your friends. This video game might have a variety of mini-games, custom skins and apparel, content sharing features, or a story mode where you can complete missions with your friends.
Super cool. And I hope possible sooner than later.
btw, Playbyte’s founder, Kyle Russell, is a top voice in the gaming/tech world and a great Twitter follow. Here’s his vision for Playbyte:
Baseball Weekly: The Science of Illinois Baseball
My strong point is understanding the technologies and the physics behind the technologies, and interpreting what the data mean. Charlie’s strong point is really more on the analytics side — using the data, compiling it in interesting ways to make it useful to the on field people, the coaches and players, and communicating that to them is a big deal. We don’t speak the same language.
Charlie Young is a computer science and astronomy major at the University of Illinois. Alan Nathan is a world-renowned baseball physicist at the University of Illinois. This short documentary explores Charlie and Alan’s work with U of I’s baseball team to enhance player performance and development using analytics, which has transformed U of I into one of the most sophisticated and successful college baseball programs in the country.
Art Weekly: Lyrical Lemonade x Chicago Bears
To be clear I am a hardcore Packers fan. It pains me to feature our rival, the Chicago Bears, but this is awesome. The Bears collaborated with Lyrical Lemonade, a Chicago multimedia company founded by Cole Bennett, for the release of their 2020 schedule. Lyrical Lemonade has deep roots in the streetware community and Bennett is best known for his work directing music videos for popular rappers like J Cole, Kanye, Wiz Khalifa, Rich the Kid, Juice Wrld, Vic Mensa, Lil Durk, and YG.
Lyrical Lemonade also worked with Jordan to release a custom shoe for the 2020 NBA All-Stare game in February.
