On Language & Chaos
Disentangling storytelling
On Language
Storytelling is never more important than in the early stages of a startup when a founder needs to kick off the reflexivity flywheel to convince investors, employees and customers that their version of the future is both attractive and attainable.
However, I find myself lingering on the idea that there's a difference between the story told to customers and employees and the story told to investors.
The story you tell customers focuses on solving a painful problem more effectively than competitors.
The story you tell employees focuses on culture, purpose and personal growth.
While the story you tell investors is more esoteric. Alongside your traction, customer acquisition channels, and competitive landscape, you need to paint a picture of long-term defensibility and unit economics.
It always reminds me of this Picasso quote:
“When art critics get together they talk about Form and Structure and Meaning. When artists get together they talk about where you can buy cheap turpentine.”
In the early stages, most founders are heads down solving the problem right in front of them, putting one foot in front of the other and leaning into opportunity when it presents itself, not dwelling on the "moats" they'll build in five years time.
"There will be no "market network" if I can't hire an engineer in the next month."
Nevertheless, the founders who are the best at fundraising know how to describe future competitive advantage in words VCs like to hear, weaving the 7 Powers into the company's future.
They know there’s a reason VCs with large funds look to understand long term defensibility and unit economics. With the power-law nature of VC fund returns, to deliver strong returns to LPs a VC fund needs to invest early in at least one company that is worth >±$1bn at the time of exit. To attain that valuation 7-10 years into its journey, a startup needs attractive growth prospects, which means they have a unique position in the market which allows them to continue to grow quickly on strong unit economics for many years to come. Which is why even at the early stage VCs are looking for a plausible story of future competitive advantage.
Yet, with the number of founder meetings VCs have each week, it’s difficult to understand every startup’s industry and solution well enough to assess the probability of long term defensibility without the founder guiding us on that journey.
Some VCs get around this by simply backing talented founders who they trust will find the opportunity for competitive advantage and lean into it along the journey. But that can be recursive because what looks like a “talented founder” is usually either past success, credentials, or the ability to tell a good story to an investor….
To increase the diversity of founders we invest in we need to get better at recognising brilliant founders who don't yet have the success, credentials, or language to describe their long term strategy in words VCs want to hear.
I’d love to hear your ideas for how we can improve at this, please hit reply.
On Chaos
Last weekend I took my first trip out of Sydney since June 2020 - a one hour drive out to the Central Coast.
There I embarked on Chaos by James Gleick, a popular science book from the 1980s introducing laypeople to the then-emerging science of Chaos Theory and the individual mathematicians, physicists and meteorologists who began to find order within disorder. I highly recommend.
For an intro to Chaos Theory, start here:
Links I loved
Visual search engine same.energy
How did the world get so weird? By Matt Clifford
On variance-amplifying institutions triumphing over variance-dampening institutions.
I want to cover Raj Chetty’s work in more detail in another newsletter but for now, this is a wonderful intro to his work using data to understand equality of opportunity.
Howard Marks bravely changing his mind on Growth:
If you’re still in lockdown, take inspiration from my mate Ollie, dad of two young kids in the UK, who turned his spare room into a club and livestreams DJ sets every Saturday night (which happens to be Sunday morning in Sydney while I write this newsletter):
As always, I would love to hear from you, and if you enjoyed this newsletter please share it!