the fundraising market is very frothy right now. i haven’t spent much time full-time in venture (only three years) but this is definitely the most frantic i have seen the industry, and i hear the same thing from other investors. here are a few thoughts on it, in order:
- aggression begets aggression. my colleague derrick pointed out that when one founder starts acting more aggressively in tech, it can force the hand of their competitors (to make them step up their aggression as well). for example, mark zuckerberg’s acquisition of scale and huge payout offers for researchers are aggressive moves, which potentially pushes other founders to act similarly.
- pivots are the new constant. this directly follows the previous point about founders’ increasing aggression. my colleague gaurav described this phenomenon - one thing that you can count on in the ecosystem right now is companies re-inventing themselves / launching new product lines / doing whatever they can to stay ahead of the curve. perhaps not pivoting in the traditional sense of the word (changing the entire course of your company to move in a different direction), but sometimes happens too. handshake has a new product matching recent grads to ai labs, the ceo says it could generate $100m in arr by the end of the year. a lot of the engineering contractor marketplaces (turing, micro1, mercor, etc) have realized they’re sitting on a great asset (data labelers) and their revenue is skyrocketing by pursuing this new direction. in saas, it’s probably now harder to win big if you aren’t constantly pivoting, because all of the other increasingly aggressive entrepreneurs in the ecosystem are doing so. for example, retool had a great business in the internal tools space, but was late to the ai wave (airtable too perhaps). other companies like replit were quicker to move, and have seen massive revenue growth ($10m → $100m in revenue in six months).
- momentum is a strong moat. moats that used to exist could be gone now given it’s way easier to build software, and buyers who traditionally wouldn’t have purchased (both on the enterprise and consumer side) are intrigued by ai products (so customers relationships may be less of a moat too). some still exist (like brand, having access to proprietary data to train models on, etc), and one of them is momentum, which directly follows the last two (increasing founder aggression → increasing importance of pivots). if companies of all sizes, from small startups to large incumbents, are constantly pivoting, momentum matters a lot - whoever can generate momentum, can increase the quality of their brand (retain great mindshare), attract the best people to work for them (and invest in them), etc.
if this is the case, what are some things to look for in founders these days? this isn’t an exhaustive list.
people who are serious about company-building. it’s probably harder than ever to be a “tourist” in this ecosystem. imagine you accrue some good logos on your resume, one day you decide to yc because why not, and next thing you know it you’re at demo day with $2m in the company bank account - there are many such cases. many people seem to start companies because their friends are doing it, or because it’s a status symbol, or other similar reasons. this has always been true, but i think i can say definitively it’s happening more and more for many reasons (more vc funding available, the fundraising playbooks are published, being a founder is more of a status symbol now than it ever has been). it’s not the fault of founders, maybe it’s the fault of the system. but maybe something to look for is an underlying level of “seriousness” (a whole other topic i would love to explore). t;ldr, serious could mean a few things, including:
- decision explainability - did you quit your job “on a whim” or “because it felt right,” or have you thought more seriously about why now is the right time to do so (and not two years ago, or two years in the future)? this is a tough topic because i feel i’ve made many of my decisions in an intuitive way, and there are many people out there who have great instincts (which end up leading to them making good decisions). sometimes it’s hard to explain or over-analyze things like this. but being able to explain your decisions may decrease the amount of risk you face when you make them.
- depth of knowledge - you’re able to talk about one thing for an hour. or when people ask “why” a few times in a row you can go a few levels deeper than your peers / other founders in the space.
- ability to focus - it feels like there is an ever-increasing amount of distractions that founders face when building their companies. there are more events, more angels / vc’s, more founders building competitors to you, etc. the ability to focus becomes more important than ever. this might look like: building one project to completion (and achieving some level of success with it before moving on to the next one), working for six months as a barista because you want to do deep problem discovery in the coffee shops space, etc. one friend told me they think about this as a midwit curve
- left side (beginner level, straightforward / naive): founders who aren’t fully ramped into the tech ecosystem are just focused on learning, building, selling
- middle (midwit / “average iq”): founders who get some notoriety might start going to more events / parties, spending time on their public persona (not always a bad thing), getting in drama with other tech founders, and generally letting distractions get the better of them - who could blame them? they started with one person and an idea, now people are paying attention and that’s cool…
- right side (experienced / second-time founders): maybe they already experienced the middle of the curve and moved past it. they figured out that what matters to them most is building this company, which means avoiding as many distractions as possible. counterargument would be that going to events is good because it benefits their brand / startup, or it’s good for their mental health which is good for the company, etc
people who have “focused aggression.” aggression was mentioned earlier here as one of the root causes for pivots and momentum becoming more important. now this doesn’t necessarily mean an outwardly aggressive personality - in fact there are many people i can think of with a calm / quiet demeanor that are internally very aggressive. you can tell from the pace of their operation, their extremely ambitious goals, their constant truth-seeking nature (perhaps they’re always questioning things, have contrarian points of view), etc. this is also another topic to expand upon that i will write more about later.