Reacts: The VC Slaughterhouse -- Don't Let Investors Kill Your Dreams

Chris: You can tell Yaniv and I really, really care about this and we care about it because we care about founders because we care about innovation and frankly, we care about investors.

We care about investors having great returns. Each part of this ecosystem is really essential and in small startup ecosystems, these kind of mistakes, these kind of misunderstandings are very costly. they can add anywhere from five, 10 to 80% headwind, which is just enough kill your babies before they're born.

And that, that's tragic. It's tragic. It's heartbreaking for us.

Yaniv: The Startup Podcast is excited to partner with Until Now, an incredible product and brand studio with proven experience in developing successful businesses and brands, including the Iconic, Airtasker, Karma, Spriggy, and Path Zero. We are putting our money where our mouths are on this one. Until Now even redesigned our brand. We think it looks fantastic and we're beyond impressed with the process and people. Whether you're a startup scale up or corporate venture, Until Now runs a cross-functional approach to solving your product, brand and go-to-market challenges. Head to their website for more examples and to get in touch.

Chris: Hey, I'm Chris,

Yaniv: And I'm Yaniv,

Chris: And today we're gonna talk about the VC slaughterhouse: don't let investors kill your dreams as a founder. Now, I'm gonna let Yanev set this up because he's really fired up about it.

But this is a topic that fires me up to,

Yaniv: I'm fired up. This, gonna be a more, fired up episode than usual. So, I was speaking to a young founder yesterday, and of course, I will not be naming any names in this episode. But, I believe this, founder has a really incredible product giving too much away, the key thing to understand here is that, This company is building a product that has a user generated content aspect to it, the more data and consumers put into the product, the more valuable that data set becomes there are obviously other companies that, do this right?

YouTube, Twitter, Facebook This is nothing new, for consumer companies to become the place where user generated content is hosted and to leverage all of that content to create the core business stream. they've got a tremendous product. They've got some really exciting early traction on both sides, the enterprise side and on the user side. And so this founder is, looking to raise at the seed stage.

So this is an early stage company And this is the context in which I was talking to them yesterday and they were showing me their business plan, their monetization plan. And they were like, okay. So stage two of what we're doing is to monetize the data, But stage one is we are going to charge users of this product, the people who are putting that data in like 15 bucks a month to keep using this product after they've, put in their first five bits of data what do you think about that?

And I was like, well, That actually makes no sense. Right? It makes no sense. Why does it not make any sense? Because if your ultimate source of value is to have as much of this user generated content as possible, you don't wanna do anything to get in the way of people giving you that data. It would be like if YouTube charged people to upload videos.

Well, they don't. Right? Instead, they actually, make it really easy to upload and they eventually start paying you if you want to. become part of the YouTube partner program. You get paid for uploading your content. Why? having all of that content is what makes YouTube valuable. There are companies that pay you to host video. A Vimeo comes to mind. That's a fucked on smaller than YouTube, that's playing small. So I said, what's going on here? Right? Like, I feel like you understand what your dreams are. Why is this your business plan? And they're like, well, investors are telling us we need to show revenue in order to be able to continue to raise.

And I was like, yeah, that's what I thought. I could sense the dead hand of investors on this, right? And okay, why does this make me so upset? It's because this is thinking small and this is compromising your dreams before you've even tried to realize them. We've got these promising founders who are doing everything right, They're doing this for the first time. They don't have all the experience. They're talking to investors. They're listening to these investors advice. And what the investors are telling them is think small. Compromise your dreams. Just bring in revenue now. And that makes no sense at an early stage. Right?

The whole point of the venture capital ecosystem, Chris, we've talked about this before, is it allows you to defer. The point at which you need to become profitable, if you're profitable from day one, then you don't need venture capital.

Chris, going all the way back to episode one, small business syndrome, that was the term that we used back then, right? This idea that you should be running a startup the way you run a conventional small business. Make a bit of money, use that money to grow, whatever. Fine, if that's what you're doing, why do you need VCs at all? the VCs who are giving this advice, I feel are basically saying, okay, you don't need us. but also the problem with that is puts a ceiling on the size that you're going to get.

 Our advice is always know the game you're going to play. If you're a founder and you wanna build a business that maybe has a chance of a good industry trade acquisition at a 50 million valuation, then, maybe you can sort of focus on bringing in the revenue as early as possible.

But if you wanna be that unicorn, that billion dollar company, and. You start trying to monetize too early, you add friction. You slow the growth, you slow your own flywheel, then you are fucking your business and you've got investors telling you to fuck your business. And naive founders, or not even naive, just who are less experienced taking that advice as though were good advice and it breaks my heart.

Chris: I haven't seen you this fired up on the podcast for a while. This is awesome. I love it.

So, just to be clear, what you're talking about is founders who have a vision to build a disruptive company that changes the way an industry works or that, Once achieving scale, the flywheel or the network effects, creates some kind of net new opportunity that is incredibly powerful, disruptive, and novel.

And these founders are encountering VCs who are ostensibly there to fund this kind of ambitious, high scale growth tech company who are telling them, no, you should run this more like a traditional business and you should race towards revenue, and you should flip this B2C idea on its head to be b2b and you should prop up incumbents and you should on and on and on.

Right. And what we are not talking about here is a founder who is passionate about building a business tool. They want to build zero for accounting for businesses, or they want to build slack for chat within businesses. Those are perfectly fine B2B companies building B2B tools.

These are headless tools that make businesses more efficient. That is a very viable. Interesting category of product and business. And if you are passionate as a founder about doing that, you should go do that. And if you're passionate as an investor about investing in those companies, you should go do that.

but that's not what we're talking about. We're talking about companies and, and founders who envisage. A new kind of user experience, a new kind of network effect, a new kind of user behavior that the current industry incumbents cannot, will not and should not digest and execute on. And then those founders are being told, go sell it through an incumbent.

Go charge the supply side. These users a little bit of money. When what you need to do is race to network effects, race to the end user, or disrupt those incumbents. this is just the wrong advice. Wrong, wrong, wrong.

And so let's talk about very concrete examples here. Okay? we've given these examples maybe three or four times on the show, and we're gonna keep giving them, I keep encountering founders who are ostensibly fans of the show, but still haven't figured this out. Uber did not sell taxi dispatch software to taxi. Now people are quick to say, but Uber had taxis in their app. Yes. Uber allowed taxi to come into the Uber app. They did not build a taxi dispatch software for taxi companies. This headless white label infrastructure product to enable dispatch for the taxi companies.

Netflix did not build a DVD rental CRM for Blockbuster to help them rent out DVDs by mail. Instagram did not build a. Photo management SDK for brand websites. YouTube did not build Vimeo or Bright Kite, which was these enterprise video platforms.

And guess what? That's why they succeeded. They, Uber, Netflix, Instagram, YouTube, they went straight to the end user. They made it free, to use in the case of YouTube and Instagram, they made it easy to use in the case of Uber and Netflix and they disrupted entire industries. that would not, could not happen if they went the other way.

And often you'll hear founders push back on this and say, well, we're gonna start b2b and then we're very clever, Chris, listen to this. We're gonna then become b2c. It's brilliant. And it's like, Did Amazon do that? Shopify is trying to do that now.

Yaniv: It's a bloody hard thing to do.

Chris: it's a mess, right?

Yaniv: never felt that Shopify is, gonna succeed with what they're trying to do.

Chris: Well, you know, succeed or fail there are exceptions to every rule, but they're just trying to poke their head out into the sunlight. Right? Like, we're here. Please install our app. It's just like crazy town, right? And so this is bad, bad, bad.

Yaniv: I think you were framing it a little bit as like, making people do a B2B play when it should be b2c, and I think you're right, that's probably the most common case of this, but is broader than that.

And in fact, the example that prompted my rant, like I said, this is B2C either way, it's more about, you are you going to. Monetize the consumers or monetize the content that they supply. And the plan that was put forward was both, which makes no sense, right? Because you've got completely different models, so YouTube and Vimeo. Vimeo actually, especially at the beginning, they started out as being consumer. They're like, we're better than YouTube. quality, higher definition, whatever. But if you wanna host your videos on Vimeo, you pay us for it because we're providing you a valuable service.

And YouTube was like, upload everything you can and guess what's bigger today, right? Vimeo is a fine business. And if what you wanna build is a service whether it's B2B or b2c, that, you're, asking people to pay for then fine. But if you have a different end in mind, and especially if that's an end that relies on network effects, relies on aggregation, relies on flywheels, and that premature monetization.

We'll get in the way of that flywheel, then you probably shouldn't be doing that. And that is what venture capital is for that's what drives me crazy. Folks who are devoting their days to being venture capitalists and not understanding what their role is here is to allow companies to build up these massive flywheels.

And sometimes it takes years, sometimes it takes multiple rounds before they become profitable. That's your job venture capitalists. So why are you forcing folks to monetize early if it's not in the long term interest of what is trying to be built?

Chris: The unifying, circumstance between switching from B2C or for trying to monetize end users prematurely when you're trying to create a network effect or a marketplace, is this, obsession with revenue.

And to choose revenue as the leading indicator of validation. And so what we wanna discuss for the rest of the episode is why does this happen what ends up happening as a result for these companies, for these founders who end up going down this route?

And so, the reason it ends up happening is typically one of two things. One is capital constraints for a startup. So they just have not been able to raise money, or they have not raised money yet, and they feel like the path forward. to keep the lights on, to pay salaries and so on, is we just gotta chase the revenue.

We gotta get the revenue in the door to keep the lights on. runway has run out or we've never had a runway and we need to think about clients and customers and, charging and, just getting money in the door to keep everything running. And the second reason this happens is dumb money. This is money that is risk averse. they come from traditional business thinking, or they have LPs who are putting all of these unnecessary constraints on their, deal terms and deal types. And they're like, you need to go revenue right away, right away. it's a downturn. Get revenue right away now.

Or come from a background where they don't understand B2C and they think it's easier to go to market. Through incumbents because the incumbents have all the users. So surely it's easier to go sell your photo management app or your video app or your taxi dispatch app.

Just go sell it to the taxi companies. They already have all the riders, right? why in the world would you try to go get your own riders you got free distribution or even pay distribution through taxi, Uber, just go to taxi. And that's just like so dumb. B2B is not easier than b2c.

It's not. I actually wrote a whole post about, all of the reasons why B2B is really hard. It's different, but it's not easier. It's sometimes faster to your first dollar, but it's not easier and it's not more scalable.

And so you just have to really understand those two mechanics. It's, traditional business thinking and risk aversion.

Yaniv: I just wanted to add a little bit of color to that. I completely agree with it. So first of all, I just wanna be clear that we are not arguing against revenue. We love revenue. I love revenue. And eventually every business needs to bring in revenue. It needs to bring in profit, right? It needs to bring in like, Large, positive, discounted future cash flow, however you wanna think about it, right?

This is not about revenue, this is about timing of revenue. And that is where, going back to that small business syndrome concept that we discussed in the very first episode of this podcast. the game you're playing. The point of venture capital, the point of startups is to say, we think the best way to maximize our future discounted cash flow is to be.

Burning money for quite a long time until we reach a scale where we can, thanks to the economics of software and various other things. Thanks to network effects, we can massively monetize what we've built. is important. This is capitalism, folks. So we are not saying that revenue doesn't matter, but in previous episodes we've talked about this, that the game of iterative fundraising is about iterative, de-risking of the end vision of the end state. Revenue can quite often be an appropriate way of de-risking something. if people are willing to pay you for something, that's a pretty strong signal.

So again, we're not saying this is never right, but to view revenue at an early stage, at the seed stage, even at the series A stage as like the most important or the only. Validation point, the only thing you should be de-risking, to me is crazy and especially if, revenue is actually making it harder to de-risk other things, right?

 Again, if you've got network effects or flywheel effects, is not just something that can like eventually increase your profit. It's a thing that can actually increase your product market fit. And so if revenue hinders growth and you get further away from that because you are focusing on making money instead of growing or you're focusing, to your point Chris, on appeasing incumbents instead of disrupting them or whatever it is, basically lowering the ceiling on what you can ever achieve, You are putting yourself in a box might get that $50 million exit. It, but you probably won't get that billion dollar exit. And you know, should be clear as well, when I'm talking about valuations, of course that's important. Of course, people want to, make a whole lot of money if they're a founder, most of them.

but most founders I know as well, they have a vision the money is important, but it's nearly secondary to the vision of something they wanna bring into the world. So this is, I'm just using these valuations as a proxy for scale of impact. If you wanna have a really impactful product that, changes the world in some sense, and you allow investors to kill that dream, ultimately, that's really sad and it's so unnecessary.

Chris: Yeah, the killing the dream thing breaks my heart. We keep adding this caveat, It's about what the founder's dream is and what goal of the company is. And so I keep saying, you want to go build Slack or Build Zero and target b2b, or if you're building a business that is building utility for a user and you charge 'em for that utility, then that makes sense.

If you're trying to build network effects or build a consumer product and you get derailed, that does not make sense, and you never want to really press hard on something you said, if it turns out that your business benefits from scale or network effects, you know, it's a software powered company.

I want to emphasize this is called the Startup Podcast, not the small business podcast. Startup suggests it is a Silicon Valley style software powered high scale company, That's what venture capital is about. the startup model. Is rooted in the idea that software powers scale, that cost to serve is incremental or nearly zero, and all of the gains are achieved at scale.

If you imagine the cost curve, if you're looking at the video, the cost curve is flat, and your revenue curve or your growth curve is exponential. And so unlike a normal business, Your costs grow and your grows, and you try to maximize that margin a little bit and, that margin is your profit?

No. With software, your costs start off way above your revenue line, and then you achieve escape velocity and that curve goes exponential. And then there's a massive area under the curve. Because the cost to serve is incrementally zero, and that's the game of a software powered digital Silicon Valley style starter.

So scale is king, scale is everything. And so anything you do that creates headwind to achieving, that's escape velocity. That hockey stick curve, that exponential curve and making that area under the curve massive. Is you're short cheating the outcome. As you're saying, you're putting a ceiling on the curve and what happens is the VC model stops being relevant cuz the VC model is, rooted in that exponential curve that's not what VC is for.

Go, get a loan, go get venture debt, go bootstrap, go do something else. and so get out of the VC game if you don't understand that and get out of the, I'm running a startup game, I'm an entrepreneur, I'm a business operator, but you're not a Silicon Valley style startup founder.

We've talked about this from our very first episode, this difference between these mentalities, but I think the thing we're really emphasizing today is VCs who are in the game of funding these exponential curves, ostensibly are the ones who are corrupting the founder intent, and that is, just heartbreaking.

Yaniv: Today, I'm here with Kegar from Until Now, who looks after brand. So Kegar, why do you think brand is so important?

Kaga: So for 0.1 There's never been more competition for audience attention People are exposed to up to 10,000 brand impressions a day The question is how do you stand out 0.2 is that founders typically have great insight but as the brand that translates what's in their head to what matters to the audience A good brand communicates consistently and clearly through its voice its colors its photography et cetera et cetera When we built Karma for example we had to consider the trust in the used car space Hence the name You wanna do good and allow good to come back around then there's the competitive set So we have this bold color that we call taillight pink and that looks completely unique and helps the brand stand out Then there's the nostalgic style badge logo which customers are even asking for on t-shirts now So we've hit the brand love metric early

So yeah I think a brand is incredibly important It gives you the capability to demand attention it allows you to retain that attention and it you the power to give people reasons to believe in what you do

Yaniv: Head to their website for more examples and to get in touch.

Chris: So let's talk about some concrete examples, common examples where VCs are giving the exact wrong advice to companies. And the first one that we'd like to talk about is VC's killing Founder Dreams.

Of an incredible consumer product, So the founder has imagined a really beautiful, delightful, disruptive, experience that they want end users to pick up and use and change their behavior around And eliminate waste and friction and pain and suffering from someone's life because of the way other companies do this.

Right? So imagine, again, let's use Uber as an example. Before it was really hard to book a taxi. it was. Hit or miss, at least in the us whether the taxi would actually show up or they would stop and pick someone else up on the side of the street. you had to fumble through your credit card.

You had to pay an enormous fee. the cars were disgusting. And so Uber's dream was, Let's empower people to press a button, get a ride every time in a nice killing car, and be able to just magically get out and the bill is already paid, That's a disruptive change to the taxi industry.

We can talk about other industries as well, Netflix and Instagram and whatever. investors say, no, no, no. That's hard. B2C is hard. Making money from individual users is hard. You should just go to the incumbents. In the case of Uber, go to taxi. In the case of, YouTube, go to enterprise customers. In the case of Netflix, you should go to Blockbuster and you should sell them some great software and then they will on-sell that or they will on-service that to end users.

And so the sin here, the VC sin is killing the dream of an incredible disruptive, B2C company in favor of limited outcome, limited scale B2B company. And so that's big sin number one.

The next big sin is killing a founder's dream to create really powerful network effects and flywheels. So think about iPhone for example. Now Apple charges like a hundred dollars developer fee to be an iPhone developer because a nominal fee to get rid of tire kickers and time wasters and what have you.

But other than that, it's free to develop for iPhone. Can you imagine if they charged money. for support and platform fees and service fees to become an iPhone developer. And you don't actually have to go too far. You don't have to imagine it. That was called dumb phones, feature phones, right?

Prior to iPhone, you had to pay money to the manufacturer or Nokia or whatever, or to networks to get what they called on deck. To actually have the, precious right to be on the phone. And how much innovation occurred on those phones? Zero. And think about Xbox, for example, right? Xbox the saying in a, business like Xbox is content is king.

Can you imagine if Microsoft charged exorbitant fees order to even start testing or playing or using an Xbox to build a game? Of course not. It's crazy, right?

Yaniv: another good example from the world of phones, on the other part of the ecosystem is Android versus Windows phone, right? So Apple is different, they're vertically integrated, but we had two operating systems for mobile phones, Android and Windows phone.

was open source and made it cheap and easy for phone OEMs to install Android and, sell Android devices, Microsoft. they pivoted too late. When they saw what was happening to them, they charged licensing fees for their operating system. And so what happened? All the OEMs chose Android, and by the time Microsoft got wires to it, the network effects had taken place.

Android was the clear number two Apple. and that something that became so entrenched that it's hard to imagine it ever changing now until there's a complete platform shift.

Chris: Yeah, that's right. they tried to rinse and repeat their desktop strategy, right? Charge for windows and off you go, they beat Linux to the punch They did a better job and they thought, oh, this is just Linux and Windows all over again. We can own this with a proprietary OS and we can win again.

And it didn't work. And this is not because. Windows phone was worse, Windows CE had been around for years, years and years and years, and Windows phone was a delightful, slick little thing at amazing sound effects and visual metaphors. And, this was not poor software problem. This was a, poor business model problem.

And so, you know, just many, many, many examples. Imagine, Etsy or eBay charging money. To be able to list your products or to get access to their marketplace, right? The supply side of most marketplaces is the hardest part, most of the time, not always. And so you wanna make that as as possible, as free as possible to get people onboarded and start creating content, their products. Just to kickstart that flywheel, the third and final example here, there are many more of course, is VC's killing the founder's dream about scale of really getting to massive growth and massive scale and having that huge impact on the world, is partly the B2B thing, but just this idea of like, go through gatekeepers, go through distribution.

Partners I have a startup I'm working with where like the strategy was to partner with banks. It's like banks are the slowest. People in the world just go scrape the data out of the banks using web scraping or just go get plaid to connect to bank accounts, right? Like you do not need the permission of banks to go to market with a product that happens to use bank data.

And so it's just this idea of just like, Relinquishing your control, relinquishing, power of your own destiny, because VCs they come from an old world and partnerships are the way to go and you need to go, sidle up to investors cuz they have power over the market and they don't, they don't have power of the market.

Yaniv: Yeah. I think, partnerships is something that I've often been very, very nervous about. And, we've had episodes about this of course. but, great partnerships, thoughtfully executed as part of a cohesive strategy can be fantastic. But what happens is, yes, quite often.

founders either. Push themselves or are pushed into partnerships. That exactly, to your point, relinquish control. Relinquish control over the product, relinquish control over timelines. And you know, especially you mentioned banks. I've had this exact experience, working with a bank. Remember, giant institutions are not going to move at startup pace.

So you're going to be, Just when you're trying to get off the ground, you're gonna be in endless meetings and there'll be delays and security reviews and, goodness knows what else you're gonna be moving at large bank pace. Do you wanna do that? So as much as possible if you wanna maintain your autonomy, if you wanna maintain control over your own destiny, be really careful who you get into bed with and be really careful of investors who think that the right thing to do is to immediately glom onto a giant incumbent.

It's interesting to wonder why this is happening. I think there's this meme of the zero interest rate phenomenon, right? 10 minute delivery apps could only thrive when the cost of capital was incredibly low. there was definitely this huge proliferation of. funds that, know, are calling themselves venture capital funds or, seed stage investment funds, that came about. You know, software's eating the world.

Tech is becoming more and more important, but I'm, wondering Chris. to what extent there are a lot of these less experienced funds that are zero interest rate phenomena where, capital was just really available and people who weren't students of venture capital who weren't really understanding asset class are in asset class, if you're viewing it from the perspective of an investor, right?

They don't understand the asset class that they're investing in. And because VC. Has, 10 year return cycles, right? Typical length of a fund is 10 years. It takes 10 years for the tide to go out and to see who's not wearing pants.

Chris: it's interesting actually, you reminded me that this is a phenomena that's occurring across civilization, almost this kind of demystification of expertise and elitism and of hard jobs I'm a big TV and movie nerd, and I, pay very close attention to directors and writers and actors and, the active creating content, not just consuming it.

And a lot of writing these days sucks. A lot of these shows they're overwritten and the, plots are convoluted and the character is a paper thin. And there's a sense of like, there's just this loss of, Appreciation for great writing techniques. Same thing with politicians Right now.

Everybody thinks they can be a politician. You have Trumpism, you have these, amateur politicians who don't have any understanding for. Democracy, freedom of speech, the role of, media in free and fair government. and we now have this kind of democratization of investing, right?

And like everybody can be investor and there's, a DeRisi who's a good friend of mine who runs VC lab, he's creating a VC firm A minute, just everyone can be a VC firm. You get a VC firm, you get a VC firm, and it's just like, There's no appreciation for like, what it means for the craft of being an investor in venture capital.

Now, again, I wanna be very careful, like almost say this in the last three episodes. I don't wanna be the old man shaking his fist at the democratization of access and the leveling of a playing field, I think that is a fundamental good on balance.

But what is also a fundamental good is understanding the craft that you're participating in learning, listening, reading, and paying attention to what's going on. And I don't think it's just zero interest rate phenomena. I think it's. I mean, if they can be a venture capitalist, I'll be a venture capitalist.

Well, I have made a bit of money in real estate. I can be a venture capitalist. It seems like startups are the hot thing. Let's go do that.

Yaniv: Think zero interest rates accelerated it, but I agree with everything you say. it's awful that elite has turned into a slur.

Chris: Yes.

Yaniv: That's crazy. But, also,

when we talk about the democratization of investment you know, there's like Robinhood and all that stuff, and I'm like, okay, if people wanna lose their own money by being bad investors, that's up to them.

But what's true about venture capital that's not true in many other asset classes is that the investors are active, not passive. Meaning they influence the outcome, the problem of dumb money isn't that just chooses the wrong investments to make and loses its own returns. It's that it. Has this negative influence on the startups that invest in, and that's really the problem here and the thing that's getting us fired up we've both either been founders or our founders, we know how hard it is.

We know how much of themselves people put into it, and to see, anything that reduces their chances, which are already fairly low, let's, admit it right? That's what we're talking about, these exponential return curves. most startups fail. To make those odds even lower of a really great outcome it's just not okay.

Chris: Yeah. And there are second order effects, right? If these founders have real innovation that they're trying to deploy into the world and they are being, misdirected into dead ends, or, placing a ceiling on their potential growth and impact, this has a real on pace of innovation.

Part of the reason I'm passionate about startups is because I think they're the most effective, vehicle, we have for generating new ideas, new innovation, and moving society forward in a rapid way. And so, you is not just an investment class for me, or not just a day job, but a way for moving civilization forward With investors breaking the dreams of founders And founders failing to manifest their dreams. Breaking innovation for a society is this like really terrible cascading domino effect that really, really sucks.

Yaniv: And, and it also affects startup ecosystems. You know, we, have listeners all over the world, Chris, but we are based in a smaller ecosystem here and again, the ecosystem also requires a sort of exponential returns the breakouts, right?

And you know, here in Australia, I guess we've really only seen two true global breakouts. One Atlassian, was more or less bootstrapped. the second is Canva, which I think did benefit from some very wise and patient investors. we could have had more, we could have had more of these true, Globally significant companies, if we'd had more investors who are willing to back companies for longer before they tried to monetize. Cause I also think what we have here, and I think this is true in many parts of the world, is a lot of companies that are yes, prematurely monetizing they're big, they're making money, but they're globally significant and they never will be.

And so again, another thing that makes us hard is like, okay, if we've got a company that's like bringing in 30 million in revenue and it's worth 400 million, it's hard to say, you know, you guys screwed up. But, you know, it's, the counterfactuals what could have been, that really is, sad.

 All right. let's bring this one home.

Chris: All right, so this one was a little bit more ranty and passionate than the others, and hopefully that's a, little bit of fun for the audience.

Maybe a little less structured, a less calm and measured, but, you can tell Yaniv and I really, really care about this and we care about it because we care about founders because we care about innovation and frankly, we care about investors.

We care about investors having great returns, Each part of this ecosystem is really essential and in small startup ecosystems, these kind of mistakes, these kind of misunderstandings are very costly. they can add anywhere from five, 10 to 80% headwind, which is just enough kill your babies before they're born.

And that, that's tragic. It's tragic. It's heartbreaking for us.

Yaniv: Yes. I think one advantage of having a, podcast is to have an audience of, hundreds of thousands of people that, you can publicly vent to. And I do feel a bit better, so thank you audience. but as Chris said, there's actually very serious and, actionable for founders to all of this.

Right. I hope you take this away. Do not let investors kill your dreams. And the thing to be explicit about this, it may not be easy, but there are so many fantastic investors out there who will not kill your dreams, who will support you with your dreams and when you are raising capital.

Part of your job, a big part of your job is to find those people. Do not settle for the investors who will kill your dreams, even if it's a bit harder, even if you need to look further afield. Again, if you're in a small market, you might need to look for international investors. Chris, you just had a whole episode recently about moving to the us.

Don't settle. You're gonna be putting so much of your life force into this thing. Don't settle for investors who will kill your dream. part of doing this is knowing that the advice you're getting from those investors is not good advice and that there are other people out there.

Because I think one of the things that happens is people start to feel defeated. They hear from a few investors, oh, you need, to start monetizing, or you should partner with existing players and eventually. They grudgingly start to believe that and then they will take those investors money and that is the end of the dream.

So this doesn't have to be you. that's really the actionable advice and the words of encouragement from this episode.

Chris: Now just very quickly, I wanna provide a little bit of counterbalance to this and a little bit of, devil's advocate. there is very often, I'll say, almost always, the need for a founder and for a startup to compromise in the form of thin slicing in the form of focus, starting with an embarrassingly narrow, minimum viable product.

And, iterating towards their ultimate vision. There is a difference between that and contortion to switch from a B to C idea. to a B2B idea to switch from a go-to-market strategy that is, self-reliant to a go-to-market strategy that is reliant on, go-to-market partners to switch from a flywheel business to charging users, upfront charging your supply side of a marketplace or a network effect business upfront.

These are not thin slicing compromises. These are contortions, these are corruptions. Of your original intent knowing the difference between those two things? Well, we've given some examples here, but is sometimes in art, it's sometimes rooted in experience. It's sometimes rooted in asking for the right advice, and so this is a, gotcha that you need to watch out for.

It's not, sometimes very obvious.

Yaniv: Absolutely right. We're not, advocating boiling the ocean and realizing your dream. On day one, we're advocating, not allowing you. To be distracted from your dream. I'm gonna say that, we had Neal on talking about the difference between traction and distraction.

And traction is about taking actions that move you closer to your goal, right? So if your goal is your dream, which it should be, make sure you always have traction. And doing these things is a distraction. So don't let this happen to you.

Chris: I love that. Yes. Is on the critical path to success? Is thin slices, Iteratively getting you to success? Or is it a distraction? a side journey, a fork in the road. as I said, it takes a bit of taste and experience and intuition and, what have you to get that right.

But it, it's essential that you understand the difference between those two things.

Yaniv: Now , Chris, if people want your help around some of the challenges that they might be facing on this very topic, how can they connect with you?

Chris: Yeah, I touched on earlier, find myself doing that as part of my startup advisory. So if you wanna learn more about that, feel free to visit chrissaad.com/advisory.

I work with a small handful of companies at any given time, so let me know what you're doing and if there's time and then there's a fit, we, we can partner up on that.

Yaniv: every time I've referred someone to you, Chris, they get to talk to you for a bit, they come back, basically with their mind blown and, very grateful for the opportunity. So folks, I highly recommend, reaching out to Chris and getting some of that help that you might think that you need.

Chris: That's very kind. And also don't forget the Startup Pact. If you've, listened to the show even just a few times and. Felt like you've gotten a ton of value from it. The only thing we ask for in return is to please subscribe to us in your favorite podcast app.

Rate us and review us in that same app. and recently we just launched our new YouTube channel, so please go give us a subscription over there. It'll help founders discover the show and help us to help more companies succeed.

Yaniv: Absolutely. Okay. That was fun, Chris. Thank you for, for my therapy session, this morning. have

Chris: worries. That's awesome.

Have a great week. See you later guys. Bye-Bye.